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A credit card at 20.74% is one of the most expensive forms of money available to an Australian household. The minimum repayment is designed to keep you there.
Minimum repayment trap modelled · Balance transfer check
At a glance
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Australian cards typically charge 19–22% p.a. on purchases.
Time to clear the card
—at this repayment
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Why minimum payments feel endless
The minimum shrinks with the balance
A 2% minimum on $8,500 is $170 a month, most of which is interest. As the balance falls the minimum falls too, so the loan asymptotically approaches zero without ever arriving.
Interest is charged from day one
Unlike a mortgage, cards usually charge interest on purchases immediately once you carry a balance. There is no grace period while you owe money.
Balance transfers buy time, not forgiveness
A 0% window only helps if the repayment clears the balance inside it. Fees of 2–3.5% are charged upfront on the full amount transferred.
$8,500 at 20.74%, paying $300 a month
That clears in three years and four months and costs $3,278 in interest — 39% of the original balance. Total repaid: $11,778.
The first month alone charges $147 of interest, which is why the 2% minimum is designed to feel manageable. At the minimum this balance would take decades. At $300 it takes 40 months. The gap between those two outcomes is not income, it is the repayment instruction.
Credit card questions
What is the minimum repayment in Australia?
Most issuers require 2% of the closing balance or $25, whichever is greater. Some use 3%. The minimum is set to satisfy regulators, not to clear your debt efficiently.
How does a balance transfer actually work?
You move the balance to a new card at 0% for a promotional period, paying an upfront fee of 2–3.5%. Purchases on the new card usually attract the standard rate immediately, and any payment you make is typically applied to the transferred balance first — so new spending sits at 20%+ unchecked.
Does closing a credit card hurt my credit score?
Closing a card reduces your available credit, which raises your credit utilisation ratio and can lower your score in the short term. It also removes a facility you may want later. Reducing the limit is often better than closing the account.
Should I use a card for the points?
Only if you clear the balance in full every month. A $3,000 balance carried for a year at 20.74% costs $620 in interest; the points earned on that spending are worth perhaps $45. The card wins and you lose.
What if I cannot make the minimum repayment?
Contact the issuer before you miss it and ask about a hardship arrangement. Missed payments are recorded on your credit file for five years and affect borrowing capacity for a mortgage long after the debt is gone.
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Results assume a fixed interest rate, no new spending and no annual fee. Balance transfer analysis assumes the promotional rate applies for the full period and the balance clears within it. General information only.
Reviewed November 2026 · FY2026–27 rates and thresholds