Credit Card Minimum Payment: Everything You Need To Know

Credit Card Minimum Payment: Everything You Need To Know

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The minimum payment on a credit card is the smallest amount of money you’re required to pay on your bill. Failing to pay at least this amount of your bill can result in penalties, such as your bank imposing fees and negative marks appearing on your credit score. Each bank has a different method for calculating a credit card’s monthly minimum payment.

Minimum Credit Card Payment by Issuer

Each bank or credit card issuer has a slightly different formula for calculating the minimum credit card payment. In general, however, the payment is required to be large enough so that the cardholder pays at least some portion of their principal balance. This rule prevents banks from setting minimum payments that would result in negative amortization -- that is, having minimum credit card payments where the user is paying less than their interest.

IssuerMinimum Payment FormulaYour Minimum Payment Will Be At Least
American ExpressInterest charged on the statement plus 1% of the new balance (excluding any overlimit amount, penalty fees and interest on the statement)$35
Bank of America1% of your balance plus new interest charges$25
Barclaycard1% of your balance plus new interest charges$20 OR the new balance, if it's less than $20
Capital One1% of your balance plus new interest charges$25 (or below if your balance is less than $25)
Chase1% of your balance plus new interest charges$25 OR the new balance, if it's less than $25
CitibankThe greater of: 1% of your balance plus new interest charges OR 1.5% of your new balance$25 OR the new balance, if it's less than $25
U.S. Bank1% of your balance plus new interest$30 OR the new balance, if it's less than $30
Wells Fargo1% of your balance plus new interest charges$15

*Unless otherwise noted, the minimum payment will also include any past due amounts or late fees.

Note that the above formulas are current as of the time of writing this article, and are subject to change. You can always find your current minimum payment formula in your cardmember agreement. If you don't have a copy of it, you can call your bank and ask that a copy be sent to you.

Through the Credit Card Accountability Responsibility and Disclosure Act of 2009, your credit card issuer is required to display on your monthly bill how long it would take to pay off your entire balance using only the minimum payment. Additionally, they are required to show how much you have to pay each month if you were to pay off the balance within 36 months.

What Happens If You Pay Just The Minimum Amount Due On Your Credit Card

Making just the minimum payments every month can cause you to carry a balance for an extremely long time as well as have negative impacts on your credit score.

The minimum payment, contrary to some myths, is not designed to pay off your balance in 10 months. Instead, we find that minimum payments can often result in you having to pay down your balance for upwards several years or more. If you want to see the effects different payments will have on the time it takes you to pay back your credit card loan, we suggest using on of our calculators.

We modeled out and graphed the change in a sample outstanding credit card balance as a result of several different repayment options, including sticking to just the minimum. The graph below shows how quickly balances go down based over a 24-month period, for a principal balance of $15,000 at an APR 13% -- both of which are about average among indebted households.

A graph showing how quickly your credit card balance will go down with different repayment schedules.

In the above example, the individual making just the minimum payments on the $15k balance would pay $3,409 in interest charges over two years. Paying just twice the minimum payment reduces the interest charges by $686. Those who could manage to pay 4 times the minimum payment would save $1,580 in interest.

What Does Paying The Minimum Amount Due Mean For Your Credit Score?

Paying the minimum on your credit card bill has no direct impact on your credit score. However, consumers should be aware of the potential risk it poses to increasing their overall credit utilization – a factor that may indeed lower your FICO score. Credit utilization refers to the percentage of your total available credit limit you are currently using. For example, if your outstanding balance is $400, and your available line of credit is $1,000, your utilization would be at 40%.

Though there is no hard rule about what is the ideal credit utilization, it is generally best to keep it below 30%. Note that there is no radical shift that happens once you reach 30% -- instead it is simply a simple rule of thumb to go by. When you make just the minimum credit card payments, are lowering your overall credit utilization by the lowest possible amount. If you are close to having maxed out your credit card, paying just the minimum will cause your issuer to report a high utilization to the credit bureaus.

Consequences of Paying Less Than The Minimum Credit Card Payment

Paying less than the minimum amount due on a credit card will have a series of negative consequences, the most immediate of which is having to pay fees. On top of any late payment charges you’ll have to pay, your issuer may also report your tardiness to the credit bureaus, which will leave a long-lasting impact on your credit report and credit scores. In most cases, paying less than the minimum amount due will be treated as if you did not pay your bill at all. Unless you officially worked out a separate payment plan with your issuer, you are contractually obligated to pay at least the minimum.

Here are is a little more information about the three major consequences of paying less than the minimum amount due on your credit card:

  • Late Fees: Your issuer will charge you a late fee that you will be required to pay in full on your next billing statement. The fee will make your next month’s minimum payment larger than what it would have otherwise been. By law, your first late payment cannot exceed $25. A second late payment within the following six billing cycles can result in a $35 fine.
  • Penalty APR: Paying less than the minimum amount due can cause your issuer to impose a penalty APR on your future purchases. This special type of APR is much higher than average, often being as high as 29%.
  • Credit Score: Since paying less than the minimum amount due counts as a late payment, it also has a negative impact on your credit score. Payment history accounts for 35% of a FICO score, so it shouldn’t be taken lightly. Most issuers won't report you to the credit bureaus unless you become severely delinquent. That implies failing to pay at least the minimum amount due for 60-90 days.
Joe Resendiz

Joe Resendiz is a former investment banking analyst for Goldman Sachs, where he covered public sector and infrastructure financing. During his time on Wall Street, Joe worked closely with the debt capital markets team, which allowed him to gain unique insights into the credit market. Joe is currently a research analyst who covers credit cards and the payments industry. He earned a bachelor’s degree from the University of Texas at Austin, where he majored in finance.

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