By LaToya Irby
Edited by Michelle TipswordWhat Is a Credit Card Minimum Payment?
Quick Answer
A minimum credit card payment is the smallest amount you can pay on your credit card each month and avoid a late fee and other penalties. It’s based on your balance, APR and previous account activity.
When you use your credit card to make purchases, you must make at least one payment each billing cycle. You don't have to pay your entire balance each month, but you do have to pay your minimum payment. This is the smallest amount you can pay without facing consequences.
What Is a Credit Card Minimum Payment?
A credit card minimum payment is the smallest payment you can make to keep your credit account in good standing. Paying your minimum payment helps you to avoid late fees, negative credit reporting and a potential annual percentage rate (APR) increase.
Your credit card issuer calculates your minimum payment for you and lists it on your monthly billing statement. Your minimum payment may only be a small portion of your statement balance or current balance.
| Minimum Payment | Statement Balance | Current Balance | |
|---|---|---|---|
| Definition | The minimum amount you must pay each month to keep your account in good standing | The total amount of charges, plus any interest and fees, charged to your credit card during the most recent billing cycle | How much you owe on your credit card at any moment, which may include a remaining statement balance, interest, fees and any new charges since your last statement closed |
| How it's calculated | A percentage of your statement balance | Your total charges (and credits) each month, plus any interest and fees | A total of any leftover statement balance, interest, fees and any charges or credits to your account at any moment |
| When it's due | By your payment due date each month | By your payment due date each month, but you can revolve your balance from month to month as long as you make the minimum payment | No due date; this is just a representation of where your account stands at any time |
| Where you'll find it | On your monthly statement, in your credit card app or in your online account | On your monthly statement, in your credit card app or in your online account | In your credit card app or in your online account |
How Are Credit Card Minimum Payments Calculated?
Minimum payment formulas vary slightly by card issuer, but they usually include at least one of the following:
- A flat dollar amount
- A small percentage of the balance, typically 1% to 2%
- Interest and fees
- Past-due amounts or payment plan installments
On very small credit card balances, your minimum payment may be equal to the entire balance. On larger balances, your minimum payment is usually based on a percentage of your balance plus any interest or fees.
You can check the card's terms and conditions or your monthly statement to see how your issuer calculates your minimum payment.
Example: You have a statement balance of $1,000. Your credit card issuer calculates your minimum payment at 2% or $25, whichever is less. Because 2% of $1,000 is only $20, your minimum payment would be $20.
Where Can I Find My Credit Card Minimum Payment?
Your minimum payment will typically change each billing cycle as you make purchases or pay down your balance. Checking your minimum payment is a good practice so know the amount you're required to pay to keep your account current.
You can find your minimum payment on:
- Your monthly paper or online billing statement
- Your online or mobile account
- The card issuer's customer service line
Learn more: How to Read Your Credit Card Statement
Should I Only Pay the Minimum on My Credit Card?
Paying the minimum keeps your account current; however, it's not a good long-term strategy for paying off your balance.
If you pay only the minimum, any remaining balance will be charged interest. This can cause your credit card balance to balloon and, over time, may become unmanageable.
- You'll pay more interest. Most of your minimum payment with a revolved balance goes toward interest, not your balance. This means your balance only goes down slowly and you'll pay interest over a longer period of time.
- It takes longer to pay off. Since only a small portion of the payment reduces your balance, paying only the minimum can extend your payoff timeline.
- Your credit utilization may remain high. A high balance leads to a high credit utilization ratio, which affects your credit score. Paying only the minimum slows your progress toward shrinking your balance and lowering your utilization ratio.
Tip: Paying the minimum amount due is better than nothing. It keeps your account current, helps you avoid late fees and protects your credit score by building a positive payment history.
Learn more: Reasons to Pay More Than the Minimum on Your Credit Card
What Happens if You Miss a Credit Card Minimum Payment?
Missing a minimum payment can trigger several consequences.
- Late fee
- Penalty APR
- Negative mark on your credit reports, usually after a payment is 30 days past due
- Loss of rewards earned during that billing cycle
- Cancellation of promotional APR offers
- Loss of grace period
If your card issuer imposes the penalty APR after you miss two payments, the higher rate typically stays in place for at least six months. You may be able to regain your previous rate by paying at least the minimum payment on time for six consecutive months. However, some card issuers may continue to apply the penalty APR to new purchases.
Learn more: What to Do if You're Late on a Credit Card Payment
How to Lower Your Credit Card Minimum Payment
If your minimum payment feels unmanageable, here are a few strategies to lower it.
- Pay down part of your balance. Since your minimum payment is tied to your statement balance, lowering your balance can reduce your next minimum payment. For instance, you can pay off a credit card installment plan balance to lower your minimum payment.
- Get caught up. Paying off past-due amounts will bring your account current and help you avoid additional late fees.
- Contact your card issuer. If you're experiencing financial stress, ask about your card issuer's hardship program. These programs may temporarily lower your interest rate and minimum payment.
- Consider a 0% intro APR credit card. You can eliminate interest and lower your monthly cost for a period of time, usually 12 to 21 months, by transferring your balance to an introductory 0% APR card. Keep in mind that balance transfer fees may apply.
- Explore a debt management plan. If you have significant credit card debt and are not able to keep up with payments, a nonprofit credit counselor may be able to negotiate a lower interest rate and monthly payment on your behalf through a debt management plan. However, you may have to pause use of your credit cards during the program (or your card issuers may require account closure), which can cause a hit to your credit scores through a loss of available credit.
Tip: Avoiding new purchases while you pay down your balance can prevent a spike in your minimum payment.
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The Bottom Line
Your minimum payment keeps your account in good standing, but paying only the minimum can make your credit card balance more expensive and harder to pay off. Pay more than the minimum whenever possible to save money on interest, lower your credit utilization and pay off your balance faster.
If you're considering a balance transfer card to temporarily lower your minimum payment, shopping around is key. Check your FICO® ScoreΘ for free from Experian to see where you stand and estimate your approval odds before applying.
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About the author
LaToya Irby
LaToya Irby is a personal finance writer who works with consumer media outlets to help people navigate their money and credit. She’s been published and quoted extensively in USA Today, U.S. News and World Report, myFICO, Investopedia, The Balance and more.
Read more from LaToya