The psychological trick that makes it harder to pay off your credit cards

Too many Americans, it seems, have a broken understanding of what the minimum payment on their credit card means and what purpose it serves.

It turns out, as the new research shows, minimum payments are a cunning tool, calibrated to extract as much profit from people as possible.

Over the past few decades, most credit card companies have tweaked their formulas lower and lower. It used to be that you had to pay at least 5 percent of your credit-card balance each month; these days, the typical rate for a minimum payment is about 2 percent.

The logic behind this trend, as an industry consultant once explained to PBS, was to make people comfortable with carrying more debt and for longer periods of time. Lower minimums meant higher balances. Card issuers would prefer if customers drew out the repayment process as long as possible, because that maximizes the amount of interest.