How to calculate the minimum payment of your credit card

The minimum payment of a credit card is the minimum amount of money you must pay the bank to avoid a penalty. And if you pay attention to your credit card statement, you’ll notice that each month the minimum payment nor it is stable, that is, it changes from one month to another. This is generally due to the fact that your outstanding balance is used to calculate the minimum payment, a figure that could be different from the previous one, for example. The rule is that, the higher your outstanding balance, the more the minimum amount you must pay to avoid falling into arrears.

Although it is best to choose to pay more than the minimum (because this will allow you to have a higher credit score), it is important that you understand how the minimum payment is calculated and what happens if you don’t pay it on time. Although issuers use different calculation methods, most of them agree on certain points. This is what you need to know about it.

How to calculate the minimum payment of your credit card

If you cannot pay the full balance of your card in cash (which is the best practice you can implement to get rid of interest, double the grace period and, of course, improve your credit) at least you must pay a little more than the minimum fee. Think that this will allow you to reduce the accumulation of interest on interest, something that is known as compound interest.

But, How can you find out what your minimum payment will be? Here we tell you in detail:

Calculate the minimum payment with finance charges

The first method, and the one used by many credit card issuers, is to calculate the minimum payment applying a percentage to the outstanding balance that is reflected at the end of the billing cycle then add a monthly charge. For example, let’s say your outstanding balance is $1,000 and your card’s APR is 24%. If your minimum payment is 1% -which would be $10- you will have to add a $20 fee to this to reach a total minimum payment of $30.

Calculate the minimum payment only with a direct percentage

Some credit card issuers calculate the minimum payment using the application of a direct percentage to the outstanding balance, which is the one that appears on your account statement as the final balance of the billing cycle. When direct percentages are used, these are usually higher than in the previous case. In fact, it could vary between 2% and 5%. In addition, you must take into account that this percentage will be applied both to the outstanding balance and to the sum of the interest.

Let us see this case in the light of the same example. If your outstanding balance is $1,000 and your bank uses a direct rate of 3%, then the minimum payment will be $30.

Alternative Minimum Payment Calculation Method

Although it does not occur in most cases, some issuers and banks combine both previous methods and set the minimum amount using the one that yields the largest amount of money or, on the contrary, applying a minimum limit established by the bank.

In this case, for example, if your outstanding balance is $1,000 but the bank sets a minimum limit for all cards at $35, this is the minimum amount you will be charged. If your outstanding balance is over $1,000 and the minimum direct percentage payment is, for example, $50 – and the first method is $40 – then you will have to pay the higher one, that is, $50.

Warning: If you overdraw your card, the issuer could add this difference – that is, the difference between your maximum limit and the amount you spent – to your minimum payment. For example, if your credit limit is $1,000 and the cycle closes with a balance of $1,050; the minimum payment could be 2% of the balance ($21) plus that $50 overdraft. This would give us a minimum fee of $71.

Frequent questions

How do I know how the bank calculates the minimum payment on my credit card?

To find out which method your bank or issuer uses to calculate your credit card minimum payment, the best thing you can do is read the contract. Look for a section titled “How is your minimum payment calculated,” “How to make payments,” or something similar. If you cannot find this section, do not hesitate to call the customer service line (check the back of your card) or go to the bank to ask an account representative for help.

Is the minimum payment equal to the total balance on my card?

No, but it could be, at least sometimes. There are some cases where banks and issuers require their customers to pay their credit card balance in full in cash. Let’s see what they are!

  • If the card is canceled. If you are more than 180 days past due and your credit card is cancelled, you will no longer have to make monthly payments because the transmitter You will be required to pay in cash.
  • If your balance is low. Let’s say you have a credit card with an outstanding balance of $25. If your bank works with minimum limits to calculate the minimum payment -and this is equal to or greater than $25- you will have to pay the balance in cash.
  • If you have a charge card. Although many consumers confuse them, charge cards and credit cards are completely different. If you have a charge card from American Express, you will have to pay the total balance in cash because this is one of the main characteristics of this type of payment method.

Can the minimum payment on my card increase?

Yes, but not in all cases. The most common reasons banks use to raise the minimum payment are:

  • Delays in payment, even if it is only one.
  • Exceed the credit limit, that is, overdraw the card.
  • Make an increase or adjustment in the APR, especially after introductory APRs.
  • If the card issuer changed its calculation method to another or modified the direct percentage.

What else you need to know about the minimum payment of your credit card

It is important that you know that the minimum payment of your credit card must be made before the deadline date and time indicated by the bank. This day is known as the payment due date. For most cards, the cut-off time to pay is until 5 pm. What does this mean? That even if you have until April 12 to pay, you must do it before 5:00 pm

There are broadcasters that extend this time until midnight, but they are not all. Our recommendation? To avoid delays, call your bank or issuer and ask what the exact cut-off time is for you to make your credit card payment without falling behind.

Once you know your payment due date and cut-off time, it’s important to make sure you send your deposit or transfer on time:

  • If you make your payments by phone, call first thing in the morning.
  • If you make your payments by mail, send a check or money order a couple of days before the due date.
  • If you make your payment online, don’t wait until the last minimum! Also remember to check that you have enough money in the account to be able to pay the card.
  • If you schedule your payments automatically, you won’t have to do anything. Just check one day before that you have enough money in your affiliate account.

What happens if you pay your credit card late?

If you miss making your minimum payment or transfer less than the minimum fee, your issuer may charge you a late fee. But is this the only consequence of missing a payment? Unfortunately not.

  • If the delay is 30 days or more, a note will be sent to main credit bureaus from the country.
  • You could also lose the promotional APR on your credit card.
  • If you miss two consecutive payments, the bank could apply a penalty APR to you.
  • If the negative note of delay reaches the credit bureaus, you will have a delinquency on your report. Remember that the delinquency note will remain on your report for seven years.
  • Your credit score or credit score could be affected, especially during the first few months of late payment.

Any payments you miss will also be added to your current minimum balance. In addition, the bank or issuer will begin adding late fees, interest, and interest on interest. This will increase your minimum payments and, therefore, it will be much more difficult for you to catch up with the bank.


Pay more than the minimum! If paying cash is not an option, paying more than the minimum will also benefit you. Why? Because choosing only to deposit the minimum fee is the most expensive way to pay a credit card.

In fact, if you only make the minimum payment and continue to use the card, you’ll see your outstanding balance go up from month to month instead of going down. Conclusion? Paying only the minimum is the perfect formula to borrow in the future.

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