Which of the following statements about minimum payments on a credit card is incorrect?

Introduction / Context:
Credit card statements usually show a minimum payment amount, which is the smallest sum you must pay by the due date to keep the account in good standing. Understanding how minimum payments work is crucial for avoiding penalties and managing debt. This question asks you to identify which statement about minimum payments is incorrect, focusing on how minimum payments affect late fees, interest charges and the pace at which you repay the total balance.

Given Data / Assumptions:
- The subject is minimum required payments on a credit card. - Options discuss late fees, portion of total debt, interest charges and percentage of balance. - We assume the cardholder pays at least the minimum by the due date. - We assume typical industry practice where late fees apply only if the minimum is not paid on time.

Concept / Approach:
If the cardholder pays at least the minimum payment by the due date, the payment is considered on time, and late fees are generally not charged. However, paying only the minimum keeps most of the balance unpaid, so interest continues to accrue on the remaining amount. Minimum payments are usually calculated as a small percentage of the outstanding balance, often in the range of 2 to 4 percent, sometimes with a minimum currency amount. Thus, statements that emphasise that minimum payments repay only a small portion of debt and that interest continues to accrue are correct. A statement claiming that you will still be charged a late fee if you send in the minimum on time is incorrect.

Step-by-Step Solution:
Step 1: Review option A. It says that if you send in the minimum payment, you will still be charged a late fee. This contradicts standard practice, because late fees apply when you fail to pay the minimum by the due date. Step 2: Review option B. Minimum payments do indeed cover only a small portion of the total debt, leaving most of the balance outstanding, so this statement is correct. Step 3: Review option C. Interest is still charged on the remaining unpaid balance even if the minimum payment is made, so this statement is also correct. Step 4: Review option D. Minimum payments are often set as a small percentage of the current balance, frequently in the 2 to 4 percent range, making this statement correct as well. Step 5: Because options B, C and D accurately describe how minimum payments work, option A is the incorrect statement the question asks you to identify.

Verification / Alternative check:
If you examine a typical credit card statement or the terms and conditions from a card issuer, you will see that late fees are triggered when the minimum payment due is not received by the due date. There is no clause that imposes a late fee simply because you chose to pay the minimum instead of a higher amount. At the same time, issuers clearly disclose that interest will be charged on any portion of the balance that is not paid in full by the due date and that minimum payments result in a longer payoff period. This confirms that the only incorrect statement is the one linking on time minimum payments to late fees.

Why Other Options Are Wrong:
Paying only a portion of total debt: This is correct; minimum payments are designed as a small fraction of the balance, so they extend the repayment period. Interest still applies: Also correct; interest is calculated on the remaining unpaid balance. Percentage of total debt: Correct, since many issuers calculate the minimum as a percentage such as 2 to 4 percent or a fixed amount, whichever is higher.

Common Pitfalls:
A common misunderstanding is to think that making the minimum payment avoids all negative consequences, including interest. In reality, while you avoid late fees and protect your credit history, you still pay substantial interest and may remain in debt for years if you pay only the minimum. Another pitfall is confusion about the difference between late fees and interest charges. Late fees relate to payment timing, while interest relates to the unpaid balance. For exam purposes, remember that paying at least the minimum on time avoids late fees, but does not eliminate interest on the remaining balance.

Final Answer:
The correct option is If you send in only the minimum payment by the due date, you will be charged a late fee., because this statement is incorrect. Paying at least the minimum on time prevents late fees, although interest charges on the unpaid balance still apply.