[maxxxxx]

When I came to the US I couldn't figure what "minimum payment" means. It took a while to realize that it's a totally arbitrary amount and really has no meaning for any kind of financial planning. I bet a lot of people think they are paying off their debt by making minimum payments.

[nucleardog]

I don't know if it's a law here, but every account statement I've ever gotten on revolving credit has always included a statement below the minimum to the effect of: "If you only pay the minimum payment, it will take you 10 years, eight months to fully pay off this debt."

When you see that beside a $2000 or $3000 balance, it paints a pretty clear picture of what paying the minimum is doing for you. I think the only way it could be improved is by adding in how much interest you'll pay over that time period.

[maxerickson]

It's not entirely arbitrary. It has to cover the interest for the payment period and some portion of the principle balance.

Only paying the minimum will certainly result in paying a large amount of interest.

[maxxxxx]

The "some portion" part is certainly arbitrary. In any case, it's named in a way that people feel safe but they absolutely aren't.

[nly]

Well the idea is people don't pay off the principle fast enough not to end up maxing out their cards. Then they just apply for new ones. This is why people are in hock for life.

Then come the vultures. Consolidation loans, payday loans, etc.