Woman reading documents while sitting in front of the computer.

What Is A Credit Card Minimum Payment And How Is It Calculated?

Miranda Crace4-minute read
PUBLISHED: July 25, 2023


If you make the minimum payment toward your credit card balance each month, you’re by no means the only one. According to a March 2022 report, around a third of credit card holders typically make the minimum payment toward their card balance. While doing this may seem like enough to keep your finances afloat, it’s not a sustainable solution in the long run.

Carrying a balance and allowing interest to accrue can put you in heavy debt. But the problem with paying your full balance to prevent interest charges is that it may not always be feasible. If you find yourself short on money, paying your minimum balance is better than nothing, though.

Let’s look closer at minimum payments, how they’re calculated and a few tips for paying off your credit card bill.

Credit Card Minimum Payment Definition

A credit card minimum payment is the lowest amount you can pay monthly to keep an account in good standing. By making your minimum monthly payment, you can dodge late fees, penalty APRs and having a delinquent account.

Even so, carrying a balance from month to month can result in high-interest charges. You’ll owe an amount much higher than your original balance and end up needing longer to pay it off. Depending on how much interest you accrue, monthly payments may even start going toward interest instead of your original balance.

If possible, always pay your full monthly credit card balance to stay out of credit card debt. If you find yourself in a tight spot, however, you should at least try to make your minimum payment each month.

Ready To Improve Your Financial Life?

Apply for a personal loan today to consolidate your debt.

How Is Minimum Payment Calculated?

Credit card issuers generally calculate minimum payments using account balances and interest rates. Each card company has its own minimum payment policy, though.

Some companies charge a flat rate as a minimum payment – $25, for instance – regardless of your balance. Others may set your minimum payment as a flat percentage – 3%, for example – of your total balance. On top of this percentage, some companies may charge interest from previous months.

Contact your card issuer to find out how they calculate your minimum payment.

How To Find Your Minimum Payment

You can find your minimum payment on your paper statement, on your online account or by calling your card issuer.

Your statement should also include a table showing how long it would take to pay your balance at the current interest rate if you only paid the minimum on your credit card. Providing this information should be standard practice for card companies following the CARD Act of 2009.

Tips For Paying Off Credit Card Debt

If you’re strapped for cash and have an upcoming payment due, you have options. Ways you can stay up to date with payments and avoid or escape credit card debt include:

  • Consolidating your debt: You can consolidate your credit card debt through various measures, such as taking out a personal loan or using a balance transfer credit card. You may even be able to pay off other debts, like medical bills, by combining them into one monthly payment.
  • Using a debt payoff strategy: One common debt payoff strategy is the debt snowball method, which means paying your smallest debt balances first. Conversely, with the debt avalanche method, you pay off your largest debts first and work your way to smaller debts.
  • Creating a repayment plan: From making a budget to using tools like a debt payoff tracker, having a plan is beneficial as you pay off debt. Being aware of the amount you earn, the amount of debt you have, and bill due dates can help keep you on track.

These strategies may enable you to pay your full balance each month instead of making minimum payments.

Credit Card Minimum Payment FAQs

For additional insight into how credit card minimum payments can affect your financial health, here are answers to some frequently asked questions.

Should I pay the minimum payment on my credit card?

You should always pay at least your minimum payment on your credit card. It’s not recommended that you pay the minimum balance unless it’s the most you can afford. If possible, it’s best to pay your full balance each month to reduce interest accrual.

What happens if I only make the minimum payment on my credit card statement?

If you only make the minimum payment on your credit card statement, you’ll have to pay interest on your remaining balance. If you continue spending more than you can pay off every month, you’ll accrue credit card debt quickly. You’ll have to pay interest on your balance until it’s paid in full.

Does making the minimum payment affect credit?

Making the minimum payment affects your credit in a few ways. For one, as your balance increases, so does your credit utilization ratio. A credit utilization ratio above 30% can dramatically damage your credit score. Late or missed payments also hurt your credit, so paying your full balance each month can lower this risk.

Why did my credit card minimum payment increase?

Your credit card minimum payment likely increased due to an increase in your balance or fees from your card issuer. Reach out to your card company to find out why your minimum payment increased.

How do I get a lower minimum payment on my credit card?

You can get a lower credit card minimum payment by paying down your credit card balance or paying it in full. Spending less on your credit card, or not using that card, may also help bring your minimum payment down.

What happens if I miss a credit card payment?

Missing a credit card payment damages your credit score. A missed payment shows up on your credit report as a delinquency and eventually becomes a derogatory mark. This can make it difficult to get approved for mortgages, credit cards and other types of loans.

Save more of your hard-earned money.

Consolidate debt for a fixed interest rate once your loan closes. Apply online in just a few simple steps.

Final Thoughts

Making the minimum payment on your credit card keeps your account in good standing. However, it’ll take longer to pay your balance off and interest will accrue on your balance. You should always try to pay your full balance each month. If you don’t have the means to do so, an alternative method of paying your debt is worth considering.

If using a personal loan to consolidate your credit card debt seems like the best approach for you, submit an application online today with Rocket LoansSM.

Miranda Crace

Miranda Crace is a Senior Section Editor for the Rocket Companies, bringing a wealth of knowledge about mortgages, personal finance, real estate, and personal loans for over 10 years.