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Minimum Payment Formula:
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The minimum credit card payment is the lowest amount you must pay each month to keep your account in good standing. It's typically calculated as a percentage of your balance or a fixed minimum amount, whichever is greater.
The standard calculation is:
Where:
Example: If you have a $1,000 balance with 2% minimum rate and $25 minimum payment:
2% of $1,000 = $20, but since $25 is higher, your payment would be $25.
Details: Paying only the minimum extends repayment time significantly and increases total interest paid. Understanding how it's calculated helps you manage credit card debt more effectively.
Tips: Enter your current balance, the card's minimum payment percentage (usually found in your card agreement), and the fixed minimum payment amount (if any). The calculator will determine your required minimum payment.
Q1: Why do credit cards have minimum payments?
A: Minimum payments ensure lenders receive some payment while giving borrowers flexibility, though it's not a recommended long-term strategy.
Q2: How long would it take to pay off a balance making only minimum payments?
A: For a $1,000 balance at 18% APR with 2% minimum payments, it could take over 8 years and cost $800+ in interest.
Q3: Can minimum payment requirements change?
A: Yes, issuers may adjust terms with notice. Some increase minimum rates for accounts with higher risk.
Q4: Is paying just the minimum bad for my credit score?
A: It won't directly hurt your score if paid on time, but high utilization (balance vs limit) can lower scores.
Q5: Are there cards with no minimum payment?
A: No, all credit cards require at least a minimum payment, though some charge cards require full balance payment each month.