Credit Card Minimum Payments

What Is the Minimum Payment on a Credit Card?

The minimum payment on a credit card is the lowest amount of money the cardholder can pay each billing cycle to keep the account’s status “current” rather than “late.” A credit card minimum payment is often $15 to $40 or 1% to 3% of the card balance, whichever is greater. If the dollar amount is higher than the actual balance charged to the card, the full balance becomes the minimum payment. The exact details differ from issuer to issuer, though.

How Do Credit Card Minimum Payments Work?

Credit card minimum payments make sure that you pay down at least a small amount of the balance on your credit card each month. But credit card issuers make a lot of profit from cardholders who pay only the minimum, because people who carry a balance end up owing costly interest. That said, the minimum payment process is pretty simple:

1. The cardholder makes purchases with their card. The cost gets added to their balance, along with any other types of transactions they make, like balance transfers or cash advances.
2. At the end of the billing period, the issuer calculates the cardholder’s minimum payment based on their statement balance (and sometimes other factors like interest and fees).
3. The issuer sends the cardholder a credit card statement listing their balance, minimum payment, and monthly due date.
4. The cardholder can choose to pay the minimum payment or any amount above that. If they pay in full by the due date, they owe no interest on their purchases. If they pay less than the full statement balance, their balance and any new purchases will start accruing interest.
5. If the due date passes and the cardholder hasn’t made at least their minimum payment, they will owe a late fee. They may also trigger a penalty APR, which only applies to the cardholder’s existing balance at first but can also apply to future purchases if they become 60 days delinquent.

Now that you know how minimum payments work on credit cards, it’s time to get into the nitty-gritty of how they’re calculated.

How Are Credit Card Minimum Payments Calculated?

Each credit card issuer calculates its minimum payment in its own way. Typically, the minimum payment is a small percentage of your balance plus things like interest and late fees (if applicable), or a flat dollar amount ranging from around $15 to $40. You will have to pay the greater of the two options.

If the total balance on your card is lower than the flat dollar amount, your balance becomes the minimum payment. To put that more simply, the credit card issuer can’t charge you more than you actually owe on the card.

Below, you can see how each major credit card issuer calculates its minimum payment.

*Note: The minimum payment amounts listed above omit past-due amounts, late fees and interest, which issuers will add to your minimum payment if they apply. For Discover, past-due amounts get added to all options, but interest and late fees only get added to the option that specifically notes it.

Credit Card Minimum Payment Formulas

The good news is that you don’t have to do any fancy math yourself to calculate your minimum payment. You can find the minimum payment required by your credit card, along with the due date for that payment, on the monthly statement you receive by mail or email.

However, if you’re still curious about the formulas that credit card issuers use, we’ll break them down for you below.

Percentage + Interest + Fees Method

The first way that issuers might calculate your minimum payment is by taking a flat percentage of your balance from purchases (and other transactions like purchases or cash advances) and then adding any interest or fees charged during the billing cycle. Or, if the percentage-based total is too low, there is a fixed dollar amount that you’ll have to pay.

Let’s say, for example, that you have a $1,000 balance from purchases, you owe $50 in interest and fees, and your minimum payment is the greater of 2% of your balance or $25. In that case, you need to:

• Calculate the percentage amount: 2% of $1,000 = $20
• Add in fees and interest: $20 + $50 in fees/interest = $70
• Make a $70+ minimum payment: The minimum is $70 because that’s higher than the flat dollar amount of $25

Flat Percentage Method

Some issuers will just charge either a percentage of your full statement balance or a flat dollar amount. This differs from the method above in that your interest and fees are lumped in with your regular transactions before your issuer calculates the percentage, rather than being added on afterward.

Let’s use the same example, which means that your balance is $1,050 including interest and fees. In this case, the minimum payment is 2% of that balance or $25.

• Calculate the percentage amount: 2% of $1,050 = $21
• Make a $25 minimum payment: The minimum is $25 because the flat dollar amount is higher than the percentage amount of $21

These are just examples, though. Since every credit card is different, there are a few easy steps you can use to calculate your own minimum payment.

Minimum Payment Calculator

You can calculate your minimum payment yourself using WalletHub’s free minimum payment calculator. All you have to do is enter your card’s balance, interest rate, minimum payment percentage, and minimum dollar amount for payments.

Then, click the blue “calculate” button to see how long it will take you to pay off your card using only minimum payments and how much interest you’d owe. Below the calculator, you’ll also find some helpful tips for making your minimum payments and paying off debt.

What Happens If You Only Pay the Minimum on Your Credit Card?

If you make at least your credit card’s minimum payment by the due date, you will avoid late fees and penalty APRs. However, any unpaid balance carried between months begins to accrue interest. Plus, not paying in full gets rid of the card’s grace period. That means new purchases will start accruing interest right when you make them, alongside your existing balance. Usually, it takes paying your full statement balance for two months in a row to restore your grace period.

It can be tempting to just pay the minimum every month. But in the long run, doing so will cost you money, and it could snowball into serious credit card debt if you’re spending more than you can pay off every month. It’s best for both your wallet and your credit score to always pay your credit card balance in full, if possible.

You should also know that only amounts paid above the minimum are applied to the balance with the highest APR on the card, if you have multiple balances (e.g. purchases, balance transfers, cash advances). In contrast, your issuer can apply your minimum payment to whatever balance it wants, and it may even be used to cover interest and fees before it ever reduces your principal.

What Else You Need to Know About Minimum Payments

How do minimum payments impact your credit score?

Paying only the minimum leaves you with credit card debt and a higher credit utilization ratio, which can be detrimental to your credit score. Paying your full statement balance each month will help your score increase much more quickly. But if you can only pay the minimum, paying on time is crucial for maintaining a good credit score.

How can you avoid forgetting to make your minimum payments?

Most credit card issuers allow you to set up automatic payments each month through your online account. You can choose to pay the minimum due, the full statement balance or a custom amount.

Autopay ensures that you’ll never miss a payment as long as you keep enough money in your linked bank account to cover what you owe.

Do you need to make a minimum payment if you have a 0% APR?

Yes, if your card has a 0% APR on purchases or balance transfers, you will still need to make monthly minimum payments despite not accruing any interest. If you don’t make your minimum payment, your issuer may cancel your 0% APR and start charging interest at the regular APR or even a penalty rate, on top of charging you a late fee.