Making minimum payments versus closing a card account


Dear Credit Smart,
I am helping dad, who is medically ill, pay debts. There is a credit card with Chase that is delinquent. My two options are make three payments of $169 to bring the account current and then the minimum payment from there on. Balance is $5,000. Or I could have the card closed and divide the $5,000 by 60 months and pay it off. I don't think I can pay more than the minimum, and we do not need any credit, so is it best to let Chase close the account and then spread the payments over 60 months? What will that do to credit and other open lines my dad has?  – Rick


Dear Rick,
You are a good son to help your dad during this time. One thing you didn’t tell me was the interest rate on your dad’s card. Assuming a 20 percent interest rate, I used our credit card payoff calculator to see what it would tell me. Using those parameters, your monthly payment would be in the $130 to $135 range if you close the account. You may be thinking that $5,000 divided by 60 is only $83 and some change, and you would be correct. However, closing an account does not stop the interest from accruing. At the end of those 60 months, almost $3,000 in interest will have been paid, on top of the $5,000 balance.

The other option is to pay $169 over the next three months and bring the account current, which would be $30 to $35 more than the payments to pay off the card. At that point, your minimums would likely decrease to $125 or so and would continue to go down each month if no new charges are made. Using our minimum payment calculator, you will see that it would take more than 21 years to pay off the card this way. The interest alone paid over that time would be more than $8,000, again assuming that no more charges are ever made on this card. This information is posted on the monthly statements and will be more accurate since all of the information is correct there. No matter what, a lot of money will be paid in interest if the account stays open and only the minimums are paid.

You bring up a valid point regarding what closing the account will do to your dad’s credit score. Closing the account may cause a temporary drop in score because the amount of available credit will be reduced, which is a factor in the credit scoring models. However, because the account is delinquent some damage has probably already been done to your dad’s credit score. Making consistent on-time payments is far more important to credit scores and delinquency causes more damage. So closing the account may not make much difference one way or the other.

As for your dad’s other credit lines, you should know that his other creditors do have access to his information. The best thing moving forward will be to make consistent, on-time payments on all of the accounts. This is the best way to demonstrate responsible credit behavior to his other creditors.

Remember to always use your credit smarts!

See related: Credit utilization: How this key scoring factor worksClosed accounts affect your credit score, but maybe not how you think

Meet's reader Q&A experts

Does a personal finance problem have you worried? Monday through Saturday,'s Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.

Join the discussion
We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

The editorial content on is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.

Weekly newsletter
Get the latest news, advice, articles and tips delivered to your inbox. It's FREE.

Updated: 11-19-2018