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How Credit Card Issuers Calculate Your Minimum Payment | Credit Cards

If your credit card balance tends to fluctuate, you may not know how much to set aside for your minimum payment each month. The minimum is the lowest amount you can pay each billing cycle to keep your account in good standing.

Credit card issuers have two main ways of setting minimum payments. To gear up for your next billing cycle, here is how some of the major card issuers calculate minimum payments and how you can predict what you will owe.

What Is a Minimum Payment on a Credit Card?

The minimum payment on a credit card is the smallest amount you must pay each month to keep your account in good standing. It’s usually calculated as a percentage of your balance, plus any applicable interest charges and fees. Making at least the minimum payment ensures you won’t get hit with late fees and a penalty annual percentage rate, or APR, and it keeps some negative information off your credit report.

But remember that if you still have a balance after paying the minimum, you may accrue interest charges. That’s why credit card experts encourage cardholders to pay down their balances each month.

“You can save more money in the long run, and it lowers your credit utilization rate,” says Chris Fred, executive vice president and head of credit cards and unsecured lending at TD Bank. “These factors also positively impact your credit score.”

Plus, Fred adds, it lessens the burden if you need to pull back to making minimum payments in the future.

How Do You Find Your Minimum Payment?

Check your monthly statement to find your minimum payment and the due date. Card issuers are required to provide this document to you – either by mail or posted to your online account – at least 21 days before the payment is due.

The monthly statement also includes a minimum payment warning box, which tells you how long it would take to pay off your balance by making only the minimum payments. It also shows how much you would need to pay to clear the balance in 36 months.

If you’re not sure how the minimum payment is calculated, check your cardholder agreement. You should have received one when you opened the card, but it may also be available when you log in to your online account. If you still can’t find the information you need, call the customer service number on the back of your credit card for the details. Or check the card agreement database maintained by the Consumer Financial Protection Bureau.

How Minimum Payments Are Calculated 

A minimum payment is usually calculated based on your monthly card balance, including any fees and interest charges. Two methods of calculating minimum payments are common:

Flat percentage. You’ll pay a percentage of your total statement balance, including interest and fees, usually between 1% and 3%. Let’s say your minimum payment is 2% of your balance, which is $5,000. You would owe a minimum payment of $100.

Percentage plus interest and fees. You might pay a smaller percentage of your statement balance, say 1%, plus the interest charges and fees accrued during that statement period. Suppose your statement balance is $5,000, and you’ve accrued $80 in interest charges and $8 in late fees. If your minimum is 1% of the balance plus interest and fees, you would pay $138.

Depending on how your issuer defines the minimum payment, a few different scenarios could change the math. For example, a small balance may result in owing a fixed amount, such as $25 or $35, or the full balance if you owe less than that fixed amount. The card issuer may also add any overdue payments or over-the-limit balances to your minimum payment.

Can Your Minimum Payment Change?

Your minimum payment can change from month to month based on how you manage your credit card.

If you miss payments or pay less than the minimum: You may be charged a late fee, which will be added to your next credit card bill, and the issuer might increase your APR. Late fees and penalty APRs lead to higher minimum payments.

If you pay more than the minimum: Your next minimum payment may decrease because you have a smaller balance.

If you pay only the minimum: You keep your account in good standing and avoid late fees but may not make much headway toward reducing your credit card debt.

How Major Credit Card Issuers Calculate Your Minimum Payment 

Each issuer sets its own calculation for a minimum credit card payment. Here are the minimum payment policies of nine major credit card issuers:

Card issuer Minimum payment calculation
American Express Past-due amounts, some over-limit amounts, penalty fees, any applicable plan balances and the larger of:

  • $40, or the statement balance if less than this amount.
  • 1% to 5% of applicable balance, depending on the card agreement, plus interest.
Bank of America The greater of:

  • $35, or the statement balance if less than this amount.
  • 1% of new balance plus interest charges and late fees.
Capital One Past-due amounts and the larger of:

  • $25, or the statement balance if less than this amount.
  • 1% of the balance plus new interest charges and fees.
Chase The larger of:

  • $35, or the statement balance if less than this amount.
  • 1% of new balance plus interest charges and late fees.
Citibank Past-due amounts, over-limit amounts, any applicable plan payments and the larger of:

  • $20 to $41, depending on the card agreement, or the statement balance if less than this amount.
  • 1% of new balance.
Discover Past-due amounts, over-limit amounts and the larger of:

  • $35, or the statement balance if less than this amount.
  • 2% or 3% of the new balance, depending on the card agreement.
  • $15 or $20, depending on the card agreement, plus interest charges, late fees and fees for any applicable debt protection products.
U.S. Bank Fees, interest charges and amounts over the credit limit, plus the larger of:

  • $40, or the statement balance if less than this amount.
  • 1% of new balance.
Wells Fargo Past-due amounts, over-limit amounts and the larger of:

  • $25, or the statement balance if less than this amount.
  • 1% of new balance plus interest charges and fees.

Note: We checked cardholder agreements from major U.S. credit card issuers to find out how minimum payments are calculated. The calculations may change at the issuer’s discretion or based on the specific credit card or cardholder. See your own cardholder agreement or call your issuer for guidance on how your minimum payment is calculated.

What Happens When You Can’t Make the Minimum Payment 

Missing a credit card payment or not paying at least the minimum by the due date can trigger several financial consequences. Here’s what you can expect from many creditors if you fall behind on payments.

Less than 30 days:
If you catch up with a missed payment before you’re 30 days late, it shouldn’t affect your credit score. But you could owe a late fee and lose your introductory annual percentage rate, if you have one.

More than 30 days:
The issuer may report your late payment to the credit bureaus, which can hurt your credit score. If you are 60 days late, the issuer can raise the interest rate on your existing balance. At 180 days, the account will likely be closed and sold to a collection agency, causing more damage to your credit score.

What Happens When You Only Pay the Minimum 

Depending on your balance and interest rate, paying just the minimum can leave you indebted for a long time, says Thomas Nitzsche, senior director of media and brand at Money Management International, a nonprofit credit counseling agency.

Minimum payments are usually a small percentage of your balance, which means it can take years to pay off your card and cost a lot in interest. Also, credit card balances can appear on your credit report, and higher balances may signal to lenders that you’re struggling to repay debts or live within your means.

“If you experience a temporary setback, like a layoff or major medical issue, it may be necessary to only make the minimum payment,” Nitzsche says. “This should be a temporary solution to protect your credit, not a long-term plan.”

You may also decide to pay just the minimum if you have a promotional 0% APR. The balance may appear on your credit report, which may lower your credit score but usually won’t cost you interest, as long as you pay it off before the promotional period ends.

Tips for Making the Minimum Payment 

Make sure you pay your credit card’s minimum every month by:

  • Setting a reminder. To ensure you pay on time, create your own electronic reminder, circle the date on a calendar, or set up alerts through your credit card account a few days before the payment is due.
  • Using automatic payments. Log in to your credit card account online or call your issuer to schedule recurring payments. The issuer automatically withdraws money from your bank account to pay the full balance, the minimum payment or a specific amount.
  • Knowing your billing cycle. Find out the start and end dates of your billing cycle, which may not align with the calendar month. The billing cycle dates can help you predict the balance that will appear on your monthly statement and estimate your minimum payment. 
  • Building a monthly budget. Leave room to make your credit card’s minimum payment, and set up a plan to pay off any balance that remains. 

Sarah Goldberg
Sarah Goldberg

Sarah is a seasoned financial market expert with a decade of experience. She's known for her analytical skills, attention to detail, and ability to communicate complex financial concepts. She holds a Bachelor's degree in Finance, is a licensed financial advisor, and enjoys reading and traveling in her free time.

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