Video: 3 things to know about credit card minimum payments


If you have a credit card, you're obliged to make at least a minimum payment every month. It sounds simple enough, but there are three important things to know about it.

1. What is a minimum payment? It’s pretty much what it sounds like: the smallest amount you can pay each month on your debt without incurring a late fee. Late fees are never good.        

2. How is your minimum payment calculated? In fancy terms, it’s usually either a percentage of your total current balance, or all of the interest you owe, plus 1 percent of the principal. Issuers also set a floor for minimum payments -- a fixed dollar amount that the minimum payment won't fall below.

Confusing, I know. The important thing is, the lower your balance, the lower your minimum payment.

3. Know that paying only the minimum will cost you over time. You might not incur late fees, but you will incur interest. And the longer you take to pay off the debt, the more interest you pay. Thanks to compounding interest, you will end up paying down your debt for a long, long time if you only pay the minimum.

Minimum payments? Simple enough. But the more you know about them, the better you’ll be at tackling that debt.

See related: How paying more than the minimum helps build credit, Basics of minimum payments, If you must pay less than the minimum, call and explain

Published: April 18, 2016

Join the discussion
We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

The editorial content on is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.

Follow Us

Updated: 10-25-2016

Weekly newsletter
Get the latest news, advice, articles and tips delivered to your inbox. It's FREE.