The credit card "minimum payment (Min Pay)" may seem like a financial buffer, but it's actually a costly trap. Beyond credit card interest rates that can exceed 30%, the long-term impact of paying only the minimum payment on your TU credit score and future borrowing ability can be far more serious than most people realise.

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Why does only paying the Min Pay "ruin" your TU?

While paying only the minimum payment is not considered a missed payment or default, in TransUnion's credit report, it reflects two critical negative signals:

• High Credit Utilisation Ratio: A crucial component of your TU score is "how much of your credit limit you've used." If you owe HK$90,000 and your credit limit is only HK$100,000, your utilization rate is as high as 90%. Paying only the minimum means your outstanding balance decreases very slowly, keeping your utilization high long-term, which will significantly drag down your TU score.
• Cash Flow Stress Signal: The banking system will interpret this as you having lost the ability to repay short-term debts, relying heavily on credit to manage your finances. This will cause your rating to quickly drop from A/B to E/F or even lower.

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TU Score and Loan Interest Rates: A Ripple Effect

Your credit rating (from A to J) directly determines your future borrowing costs. The following illustrates how borrowing costs can vary:

Excellent Rating (A-C): When applying for personal loans, you may qualify for extremely low interest rates of APR 2% - 5%.

Average Rating (D-F): APRs may increase to between 12% and 25%.

Poor Rating (G and below): Banks may directly reject your application, forcing you to turn to alternative lenders or non-bank financial institutions, where interest rates could be as high as 36% or more.

💡 Impact not limited to personal loans: When you want to buy a property and apply for a mortgage in the future, if your TU score is too low, banks may increase the mortgage interest rate or directly reject the application, affecting your ability to secure a mortgage on favourable terms.

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The True Cost of Only Paying the Min Pay

Suppose you owe HK$100,000 in credit card debt with an APR of 35%:

Only Paying the Min Pay: It would take you approximately 26 years to pay it off, with total interest expenses reaching HK$250,000 (2.5 times your original debt!).

Debt Consolidation Loan (60 months): If you transfer to a loan with an 8% annual interest rate, your monthly repayment would be approximately HK$2,000, paid off in 5 years, with total interest of only about HK$21,000.

Conclusion: The difference in interest expenses between the two is more than tenfold.

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How to escape the minimum payment trap?

If you've found yourself only able to make minimum payments for three consecutive months, take immediate action:

• Stop Taking on New Credit Card Debt: Stop incurring new debt. This is often the first step towards improving your financial situation.
• Consider Debt Consolidation: Pay off all high-interest credit card debt with a single low-interest loan. This can immediately reduce your credit utilisation ratio and may help improve your TU score over time.
• Use Lendingpot's Soft-Matching Process: No need to inquire with each institution individually; Lendingpot allows you to compare debt consolidation options from multiple providers in one go. Our preliminary matching process won't frequently check your TU like a formal application, helping you explore your options before submitting a formal application.

A loan rejection from one institution does not necessarily mean you have no options. Addressing the minimum payment problem early and finding the most suitable consolidation solution through a professional matching platform is the right way to regain financial freedom and repair your credit rating.