What Happens If I Pay Less than the Minimum Due?

a pile of past due notices

A reader sent in this question:

Is paying less than $50 a month to a creditor acceptable if that is all you can afford to pay, no matter the amount owed? Can they reject payment even though you are trying? 

I’m not sure where it started, but there’s a fairly common misconception out there that if you send a creditor a payment below the minimum and they take that payment, they have “accepted” the payment, and now everything is square. A lot of people (seriously a lot – so don’t feel bad if you’ve been operating under this misunderstanding) think that every time a creditor accepts a payment, they’re making a legal agreement, one that says, “We cashed this check, so your required payment has been satisfied.”

Creditors will almost always take whatever amount you send them – you owe them money, they want that money, so they’re not going to say no. But when you sign an agreement for a loan or a credit card, you agree to make a certain minimum payment each month. If you don’t make that minimum payment, unfortunately, you’ve breached the contract.

Consequences of sending a short payment

In other words, payments below the minimum will almost always be accepted, but your account will still be delinquent. Your account will fall behind however much your payment was short (if your minimum was $50 and you paid $30, your account would be $20 past due).

From a credit reporting perspective, the account would then be 30 days delinquent, and it would remain delinquent until you’ve made the payments required to get caught up. If you continue to send payments below what is required, your account will become increasingly delinquent, and may eventually be charged off and sent to collections.

If you can't meet your minimum payment

If you can’t meet your minimum payment, your first step should be to contact your creditor. Let them know what the situation is and see if they can help. Many lenders offer short-term hardship programs that could potentially reduce your minimum payment for a fixed number of months. You should keep in mind, however, that these programs are only designed to keep your accounts from going delinquent. You won’t make much progress paying down your debt while you’re on a hardship program.

Continued failure to meet your minimum payments may be indicative of budgeting issues, bad spending habits, or simply carrying too much debt to properly manage. A certified credit counselor can help you better understand why you’re struggling and offer a variety of potential solutions to help you stabilize your finances.

If your creditor can’t help you, or if you have multiple accounts where you’re struggling to meet the minimum payment, you may benefit from a nonprofit debt management plan, which can help you consolidate your payments into one, budget-friendly amount, while saving on reduced interest costs.

Whatever you do, don’t just keep making short payments. Unless you’ve come to a new agreement with your creditor, consistently making less-than-minimum payments will eventually end with you defaulting on the account, which will more than likely put the account into collections. The sooner you address the problem, the better.

Tagged in Debt strategies, Debt collection, Managing a loss of income

Jesse Campbell photo.

Jesse Campbell is the Content Manager at MMI, with over ten years of experience creating valuable educational materials that help families through everyday and extraordinary financial challenges.

  • Better Business Bureau A+ rating Better Business Bureau
    MMI is proud to have achieved an A+ rating from the Better Business Bureau (BBB), a nonprofit organization focused on promoting and improving marketplace trust. The BBB investigates charges of fraud against both consumers and businesses, sets standards for truthfulness in advertising, and evaluates the trustworthiness of businesses and charities, providing a score from A+ (highest) to F (lowest).
  • Financial Counseling Association of America Financial Counseling Association of America
    MMI is a proud member of the Financial Counseling Association of America (FCAA), a national association representing financial counseling companies that provide consumer credit counseling, housing counseling, student loan counseling, bankruptcy counseling, debt management, and various financial education services.
  • Trustpilot Trustpilot
    MMI is rated as “Excellent” (4.9/5) by reviewers on Trustpilot, a global, online consumer review platform dedicated to openness and transparency. Since 2007, Trustpilot has received over 116 million customer reviews for nearly 500,000 different websites and businesses. See what others are saying about the work we do.
  • Department of Housing and Urban Development - Equal Housing Opportunity Department of Housing and Urban Development
    MMI is certified by the U.S. Department of Housing and Urban Development (HUD) to provide consumer housing counseling. The mission of HUD is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD provides support services directly and through approved, local agencies like MMI.
  • Council on Accreditation Council On Accreditation
    MMI is proudly accredited by the Council on Accreditation (COA), an international, independent, nonprofit, human service accrediting organization. COA’s thorough, peer-reviewed accreditation process is designed to ensure that organizations like MMI are providing the highest standard of service and support for clients and employees alike.
  • National Foundation for Credit Counseling National Foundation for Credit Counseling
    MMI is a longstanding member of the National Foundation for Credit Counseling® (NFCC®), the nation’s largest nonprofit financial counseling organization. Founded in 1951, the NFCC’s mission is to promote financially responsible behavior and help member organizations like MMI deliver the highest-quality financial education and counseling services.