How Is Your Credit Card Minimum Payment Calculated? (2024)

FAQs

How Is Your Credit Card Minimum Payment Calculated? ›

Credit card minimum payments are usually calculated based on the monthly statement balance. The minimum payment could be a percentage of the balance, plus new interest charges and late fees. Or it could be a flat percentage of the entire balance.

Chip Lupo, Credit Card Writer

The minimum payment on a $2,000 credit card balance is at least $20, plus any fees, interest, and past-due amounts, if applicable. If you were late making a payment for the previous billing period, the credit card company may also add a late fee on top of your standard minimum payment.

For smaller balances, you'll probably need to pay the flat payment but larger card balances will have significantly higher minimum payments. A $10,000 credit card balance, could have a minimum payment of $200.

The Minimum Payment

Example: Your card issuer requires you to pay 3% of your outstanding loan balance. You owe $7,000 on your credit card. The minimum payment is 3% of $7,000, or $210.

Percentage method: Some credit card issuers calculate the minimum payment as a percentage of your outstanding balance. This percentage typically falls within the range of 1% to 3% but can vary. For example, if your outstanding balance is $500 and the minimum payment percentage is 2%, your minimum payment would be $10.

To pay off $5,000 in credit card debt within 36 months, you will need to pay $181 per month, assuming an APR of 18%. You would incur $1,519 in interest charges during that time, but you could avoid much of this extra cost and pay off your debt faster by using a 0% APR balance transfer credit card.

2.5% of the balance (inclusive of interest): It would take 505 months to get rid of your $5,000 credit card balance making just minimum payments at 2.5% of your balance.

It will take 47 months to pay off $20,000 with payments of $600 per month, assuming the average credit card APR of around 18%. The time it takes to repay a balance depends on how often you make payments, how big your payments are and what the interest rate charged by the lender is.

Understanding OneCard Credit Card Statement

Minimum amount due is usually 5% of (Fees+Interest+Purchases+GST) + 100% of EMI posted +100% of Overlimit spends . Check out our previous post about understanding your OneCard statement.

Should I pay off my credit card in full or leave a small balance? ›

It's a good idea to pay off your credit card balance in full whenever you're able. Carrying a monthly credit card balance can cost you in interest and increase your credit utilization rate, which is one factor used to calculate your credit scores.

Yes, $25,000 is a high credit card limit. Generally, a high credit card limit is considered to be $5,000 or more, and you will likely need good or excellent credit, along with a solid income, to get a limit of $25,000 or higher.

The minimum payment is calculated as a percentage (approximately between 1% and 3% ) of your outstanding balance, or it can be a fixed amount. If your total balance ends up being less than the minimum payment due, you'll likely need to pay the entire balance in full.

What Is the Minimum Payment on a Credit Card? The minimum payment on a credit card is the lowest amount of money the cardholder can pay each billing cycle to keep the account's status “current” rather than “late.” A credit card minimum payment is often $20 to $35 or 1% to 3% of the card balance, whichever is greater.

“Making multiple payments is a smart way to reduce your interest costs,” said Jason Steele, credit card expert and CNET expert review board member. “If you make payments whenever you have the funds available, you'll reduce your account's average daily balance, which will minimize your interest charges.”

Paying off your monthly statement balances in full each month is the path to avoiding credit card debt. As long as you pay off your statement balance in full before the due date, you can continue making purchases on your credit card without paying interest until the next statement due date.

To pay off your balance of $3,000 in 12 months, you will need to make monthly payments of $262 and make no additional charges to your card. If you make monthly charges of $0 and monthly payments of $100 you will pay off your balance in 34 months or 2.83 years.

You should use less than 30% of a $3,000 credit card limit each month in order to avoid damage to your credit score. Having a balance of $900 or less when your monthly statement closes will show that you are responsible about keeping your credit utilization low.

A $3,000 credit limit is good if you have fair, limited or bad credit, as cards in those categories have low minimum limits. The average credit card limit overall is around $13,000, but you typically need above-average credit, a high income and little to no existing debt to get a limit that high.

The monthly payment on a $5,000 loan ranges from $68 to $502, depending on the APR and how long the loan lasts. For example, if you take out a $5,000 loan for one year with an APR of 36%, your monthly payment will be $502.