What Is the Minimum Payment on a Credit Card?
8 Min Read | Last updated: January 7, 2025
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Learn what a credit card minimum payment is, how it works, and how it’s calculated. See what happens if you only make your card’s minimum payment.
At-A-Glance
- If you have a credit card, you’ll want to ensure that you’re at least making the minimum payment on time each month.
- However, opting to pay more than the minimum payment can help you to pay off your credit card balance sooner, which could help you to save on interest.
- If you can, paying your statement balance in full may be the best option.
When reviewing your monthly credit card statement, you may have noticed that there’s a minimum payment amount that’s listed there. In this article, we’ll provide deeper insight into what happens when you pay the minimum payment amount on your credit card and show you why, in some cases, it may make sense to pay more.
What Is the Minimum Payment on a Credit Card?
The minimum payment option on your credit card statement is the lowest amount of money that you are required to pay on your credit card each month to keep your account current and avoid late fees. However, just paying the minimum payment may increase the amount of interest you owe and prolong the time it takes to pay off your balance. If you’re able to pay more, up to the full balance, it may help you pay off your balance faster and save money on interest.
How Is a Credit Card Minimum Payment Calculated?
How a credit card minimum payment is calculated will vary depending on the card issuer. It may be calculated as a flat percentage of your card balance, or it may be calculated as a flat percentage of your balance plus interest and fees.
For example, if your credit card issuer charges a flat percentage, then your minimum payment would be a percentage of the total balance. This may be between 2% and 4% of the total balance but will vary depending on your issuer. In this case, interest and fees may be deducted from the total percentage calculated.1
If your card issuer uses the alternative method for calculating interest, you may pay a lower flat percentage but may also need to pay interest and fees for that period.2
How Long Does It Take to Pay Off a Credit Card With Only Minimum Payments?
It’s important to keep in mind that paying the minimum payment is only the minimum that’s required to keep your account current and in good standing; it may not lower your credit card balance quickly.
How long it will take to pay off a credit card by just making the minimum payment depends on a variety of factors, such as your interest rate and how high your balance is. Making only the minimum payment means you’re paying a relatively small amount of your credit card debt each month. A portion of your payment may go towards interest, and you’ll end up carrying a balance each month. This means that you may end up paying more in interest and it could end up taking much longer to pay off your credit card balance.
Your monthly credit card statement may include a table showing how long it will take you to pay off your balance if you just make the minimum payment.
When Might Minimum Payments Be a Good Idea?
There may be times when opting to make just your card’s minimum payment could be the best option for you. Consider these situations:
- You’re Facing Cash Flow Issues
For example, if you lose your job or experience unexpected expenses, making the minimum payment may be your best option. But it’s still a good idea to do the math to figure out how much this approach may cost you in interest charges.
- You Have a Large Upcoming Expense
If you expect to need cash for a planned expense, it may take priority. However, keep in mind that you may end up with interest charges if you carry a balance on your card. In this situation, you may want to consider whether the other upcoming expense has an option for financing and if so, whether the interest is higher or lower than what you’re paying on your credit card.
- To Take Advantage of a Promotional Offer
If your credit card has a 0% introductory Annual Percentage Rate (APR), then that means that for most purchases, no interest is added to your minimum payment during the promotional period, as long as you make the minimum payments on time. However, you may want to plan to pay off the entire balance before the end of the promotional period. Be sure to read the details of the promotional offer to understand how it fully works.
Benefits of Making More Than the Minimum Payment
Making more than the minimum payment can offer a number of benefits. These include:
- It may reduce your overall balance faster, potentially lowering interest charges and saving you money.
- It can lower your credit utilization ratio, which could positively impact your credit score over time.
- It can help you to pay off debt sooner, giving you more financial flexibility.
How to Lower Your Credit Card’s Minimum Payment
There are several options that may help you lower your credit card’s minimum payment:
- Pay Down Your Balance
Reducing your outstanding balance by making larger payments may help to lower future minimum payment amounts.
- Make Fewer Purchases
Making fewer purchases with your card while paying off the balance could help you to lower your minimum payment.
- Transfer Your Balance
Moving your balance to a card with a lower interest rate or an introductory 0% APR could help to reduce your minimum payment.
Does Making the Minimum Payment Affect Your Credit Score?
According to Experian, making payments on time is an important factor in your credit score.3 For payments to qualify as “on time,” you have to pay at least the minimum payment by the statement due date.
Paying more than your minimum could positively impact your credit score as it could lower your balance, and your credit utilization ratio as well, which is the amount of credit that you’re using compared to your available credit.
Is It Better to Pay Off Your Credit Card or Keep a Balance?
If you can afford to pay your credit card balance in full and on time every month, then it may be a good option for you. Carrying a balance will not improve your credit score and may negatively impact your score if it contributes to a higher credit utilization ratio.
Frequently Asked Questions
If you pay less than the minimum payment requirement, your account may be considered past due, and you could incur late fees and interest charges. Additionally, missed or late payments can negatively affect your credit score.
It is possible to make multiple payments on your credit card throughout the month. This can be a useful strategy to reduce your balance, manage cash flow, and potentially lower the interest you pay.
Paying only the minimum due on your credit card each month may help you avoid late fees and keep your account in good standing. However, paying the minimum means that interest may continue to accrue on the remaining balance, and it could end up taking longer to pay off your debt. Over time, you may end up paying significantly more than the original amount charged due to interest.
The Takeaway
Understanding how minimum credit card payments are calculated and their implications is an important step toward taking control of your financial future. Making at least the minimum payment can help you avoid late fees and keep your account in good standing. However, if you’re financially able to, it may be a good option to plan to pay off your credit card balance faster or even pay your balance in full.
1,2 “How is a Credit Card Minimum Payment Calculated,” Experian
3 “How to Improve Your Payment History,” Experian
Tony Azzara is a business technology writer and researcher based in Queens, NY, whose work focuses primarily on financial services technology.
All Credit Intel content is written by freelance authors and commissioned and paid for by American Express.
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