{"id":11313,"date":"2022-06-13T07:00:00","date_gmt":"2022-06-13T13:00:00","guid":{"rendered":"https:\/\/www.lexingtonlaw.com\/blog\/?p=11313"},"modified":"2025-05-14T15:33:10","modified_gmt":"2025-05-14T21:33:10","slug":"how-are-credit-card-minimum-payments-calculated","status":"publish","type":"post","link":"https:\/\/www.lexingtonlaw.com\/blog\/credit-cards\/how-are-credit-card-minimum-payments-calculated.html","title":{"rendered":"What is the minimum payment on a credit card?"},"content":{"rendered":"\n
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Your credit card\u2019s minimum payment is the lowest amount you\u2019re required to pay each month in order for your payments to still be considered on time and for you to avoid late fees.<\/h2>\n<\/div>\n\n\n\n

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. <\/em>See Lexington Law\u2019s editorial disclosure for more information.<\/em><\/a><\/p>\n\n\n\n

The minimum payment on a credit card is the lowest amount you\u2019re required to pay each month in order for your payments to still be considered on time. You can always pay more than the minimum, but if you pay less, you might have to deal with accrued interest and late fees. While paying the minimum keeps you from falling behind, try to pay more as often as possible.<\/p>\n\n\n\n

What is your credit card minimum payment?<\/h2>\n\n\n\n

Your monthly credit card bill should list the minimum payment you need to make alongside the total current balance. If you make the minimum payment by the end of your grace period<\/a> each month, you\u2019ll stay on track with no late fees. This allows you to maintain your credit score and good relationship with your lender when you\u2019ve got other bills to pay.<\/p>\n\n\n\n

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However, while making only the minimum payment might seem convenient, it will also likely extend your repayment period by months or even years.<\/p>\n\n\n\n

How are credit card minimum payments calculated?<\/h2>\n\n\n\n

Each credit card company calculates minimum payments differently. If your balance is less than a certain number, typically $25 or $35, your statement asks you to pay in full. Otherwise, your creditor might charge a small percentage of your balance or a flat fee like $25\u2014whichever is more. This amount might include late fees if you\u2019ve missed a few payments.<\/p>\n\n\n\n

Review each company\u2019s policies before you use their credit card so you know what to expect. Some cards<\/a> charge higher fees than others for the same purchases. If you\u2019re not sure how much your creditor charges, reach out to them before your next bill arrives.<\/p>\n\n\n\n

What happens if you make only the minimum payment on your credit card?<\/h2>\n\n\n\n

Even though you might not want to, sometimes all you can make is the minimum payment. Here\u2019s what can happen if this is the situation you\u2019re in.<\/p>\n\n\n\n

You\u2019ll owe more in interest<\/h3>\n\n\n\n

After months of paying your credit card bills, you may feel you\u2019re not making any progress. Your balance may still be large and limit your future purchases. This is because no matter how much you pay each month, if you carry any balance at all, it will accrue interest\u2014and the longer you take to pay it all off, the more you\u2019ll owe in interest<\/a>. If you have enough debt, you might end up paying more in interest than you originally borrowed.<\/p>\n\n\n\n

When you pay more than the minimum, you\u2019ll pay off more of the balance, which decreases the amount that accumulates interest. This reduces your bill and allows you to pay off the debt more quickly. Over time, the amount you\u2019re paying in interest shrinks until you\u2019re focusing mainly on the principal.<\/p>\n\n\n\n

You\u2019ll delay fully paying off your debt<\/h3>\n\n\n\n

Likewise, sticking with the minimum payments increase your debt\u2019s life span. Interest adds to the balance, and even if you have a low interest rate, you\u2019re still paying only a fraction of your debt at a time. Paying $35 a month looks convenient now, but it\u2019s less convenient when you\u2019re still paying off a loan you took out years ago.<\/p>\n\n\n\n

If your minimum payment is $25 and you pay $100 at once, you\u2019ve reduced your debt\u2019s potential life span by four months. Paying even a few extra dollars each month will help you eliminate your debt and focus on other bills. You\u2019ll also free up money for new purchases on your credit card.<\/p>\n\n\n\n

You may see your credit drop<\/h3>\n\n\n\n

Credit bureaus factor your credit utilization ratio into your credit score. Your utilization ratio<\/a> is how much of your available credit you\u2019re using\u2014for example, carrying a balance of $500 out of a total limit of $1,000 is a 50 percent utilization rate\u2014and when your ratio increases, your credit score might drop. Keeping your ratio as low as possible frees up your credit and shows bureaus you\u2019re a responsible borrower.<\/p>\n\n\n\n

FAQ about credit card minimum payments<\/h2>\n\n\n\n

Where can you find your credit card minimum payment?<\/h3>\n\n\n\n

You\u2019ll find the credit card minimum payment on your bill, typically in the payment section. The bill also notes your payment due date and current balance. If you can\u2019t find the information, call your creditor to check the balance.<\/p>\n\n\n\n

What happens if you don\u2019t make the minimum payment on your credit card?<\/h3>\n\n\n\n

When you don\u2019t make the minimum payment, the credit card company might report the missed dates to credit card bureaus, which will likely drop your credit score and make it harder for you to take out future loans. Your creditor could also charge late fees and raise interest rates, increasing the length of time it takes to pay off your bill.<\/p>\n\n\n\n

If you don\u2019t pay off your debt for months, your creditor may sell your debt to a collection agency or file a lawsuit. A court might rule in favor of wage garnishing and allow creditors to take part of your paycheck. Ultimately, a debt that started with a few hundred dollars could cost you thousands of dollars over the next several years. That\u2019s why it\u2019s recommended that you prioritize making at least your minimum payments.<\/p>\n\n\n\n

What does the CARD Act say about minimum payments?<\/h3>\n\n\n\n

For increased transparency, the Credit Card Accountability Responsibility and Disclosure (CARD) Act requires credit card companies to include a chart with your bill regarding minimum payments. The chart must show you how much to pay if you want to pay off the card in three years and note the amount of interest you\u2019ll save.<\/p>\n\n\n\n

Likewise, the chart must tell you how much interest you\u2019ll accrue and how many years it\u2019ll take to pay off the bill if you stick with minimum payments. In some cases, paying the minimum could increase the time frame by 20 years and add thousands of dollars in interest. This allows you to make an informed decision instead of assuming credit card companies have your best interests in mind.<\/p>\n\n\n\n

The CARD Act also requires creditors to include a hotline where you can request credit counseling services. Typically, this hotline appears underneath the chart.<\/p>\n\n\n\n

How is the minimum payment applied to the total card balance?<\/h3>\n\n\n\n

A creditor applies your minimum payment to the interest before the balance. If you haven\u2019t accrued too much interest, you\u2019ll slowly pay off the balance with your minimum payments. However, if you keep making purchases and the interest builds, your minimum payment will go to the interest without touching your balance. Since the principal keeps earning interest, you might end up with thousands of dollars\u2019 worth debt you didn\u2019t plan for.<\/p>\n\n\n\n

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Pay what you can to protect your finances<\/h2>\n\n\n\n

If you\u2019re on a tight budget, you might have to make the minimum payment to cover the rest of your bills. Some people do this for a month or two until they improve their financial situation. However, if you\u2019re making the minimum payment every month and getting frustrated by the lack of progress, you might want to reevaluate your finances.<\/p>\n\n\n\n

Lexington Law offers a free credit assessment that gives you your credit score, credit report summary and recommended steps to improve your credit. Once we\u2019ve discussed your assessment, we can talk about services like credit disputes, creditor interventions and identity protection that can help you work on your credit and take control of your debt. Reach out to Lexington Law<\/a> to learn more about our firm.<\/p>\n\n\n\n

Note:<\/em><\/strong><\/a> Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Most credit card bills have a minimum payment on the statement. Learn about credit card minimum payments, and stay on track so you don\u2019t incur late fees.<\/p>\n","protected":false},"author":63,"featured_media":18392,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[516],"tags":[529,536,65],"yoast_head":"\nWhat is the minimum payment on a credit card?<\/title>\n<meta name=\"description\" content=\"Most credit card bills have a minimum payment on the statement. 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