Credit card minimum payments: What to know
Credit cards come with plenty of terms and conditions. One that’s important to know about is minimum payments. A minimum payment is the smallest amount of money you can put toward your credit card bill each month and stay in good standing. Making minimum payments can help you avoid penalties and keep your account in good standing when you’re unable to pay your balance in full.
Use this guide to learn more about minimum payments, including how they’re calculated, what happens when they’re missed and how they can affect credit card interest.
What you’ll learn:
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Credit card minimum payments are typically calculated based on monthly balances.
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Consistently making only the minimum payment can help you avoid fees and penalties, but you’ll still accrue interest.
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Making more than the minimum payment each month can help you reduce debt quicker.
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Minimum payment amounts and other account-specific information can be found on monthly billing statements and by signing into your account online.
What is the minimum payment on a credit card?
A credit card minimum payment is the smallest amount you can pay each billing cycle and remain in good standing with your credit card issuer.
Paying the minimum on a credit card on time can help you avoid penalties and credit card fees. But you’ll still be charged interest when you carry a balance. Paying your full balance each month could help you avoid paying interest altogether.
How to calculate the minimum payment on a credit card
Credit card minimum payments are usually based on the monthly statement balance. It 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. In some cases, the minimum payment could include past-due amounts.
You can find out how your minimum payment is calculated by checking your account’s terms and conditions.
How to find a credit card’s minimum payment
Information about credit card terms, including the minimum payment, can usually be found on your monthly credit card statement. Most credit card issuers offer customers the choice to request a paper copy or view their statements online. Capital One customers can see their minimum payment through the Capital One Mobile app or by signing in to their online account.
Should you pay only the minimum on credit cards?
As the Consumer Financial Protection Bureau (CFPB) says, “While it is important to pay the minimum, you should try to pay more than the minimum to reduce your interest costs and pay off your balance more quickly.”
Making only the minimum payment can be the slowest way to pay off credit card debt, especially if you’re making new charges on your card each month.
What’s a minimum payment warning?
The minimum payment warning on your credit card statement tells you how long it might take you to pay off a credit card if you pay only the minimum. It’s there because federal law requires credit card issuers to explain the impact of making only minimum payments.
Depending on the balance, credit card statements provide repayment information like:
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How many months it would take to pay a balance if only the minimum payments are made
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The cost of making only minimum payments, based on the account’s current interest rate
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How much you have to pay each month to pay off the balance in 36 months
- The total interest charges there would be if the balance is paid off in 36 months
Does the minimum payment on a credit card change?
It’s common for the minimum amount owed to change from month to month. That’s because anything that affects your monthly statement balance could affect your minimum payment.
Here are 3 scenarios that might affect a minimum payment.
1. Paying less than the minimum or missing a minimum payment
Paying less than the minimum amount required or missing a payment entirely can result in a late fee. The late fee will be added to the account balance, and the updated balance will be reflected in the next credit card statement.
Some credit card issuers might increase the annual percentage rate (APR) on a card if a minimum payment is missed. Or they might calculate the future minimum payment amount using a higher percentage of the cardholder’s balance.
Keep in mind that missed payments might also impact credit scores if they’re reported to credit bureaus and end up on credit reports.
2. Paying only the minimum payment
Paying only the minimum payment may help keep your account in good standing and typically means you won’t have to pay late fees or penalties. But it means you’ll carry a revolving balance, and that might accrue interest, which is added to your balance.
If you continue to make only minimum payments on the new balance, that interest can compound. That can add to the amount of debt, the minimum payment and the time it takes to pay it off. And that’s before you consider any new purchases you make with the card.
3. Paying more than the minimum payment
According to the CFPB, “Unless your financial situation leaves you no choice but to only pay the minimum, pay your entire balance each month or as much of the balance as you can, before the payment due date, to avoid or minimize interest charges.”
Even if you can’t pay your full balance each month, making more than the minimum payment can help decrease the total balance on your card. It can also help limit interest charges.
How to lower the minimum payment on a credit card
There are a few things that may help lower the minimum payment on a credit card, including:
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Making payments that are more than the minimum amount required.
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Making fewer purchases with the card while making on-time payments.
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Working to pay off credit card debt using a debt reduction strategy like the debt snowball method or the debt avalanche method.
- Using a balance transfer to switch to a credit card with a low introductory APR. Keep in mind that balance transfers may include transfer fees, which are often a percentage of the account balance. And if there’s an outstanding balance after the promotional period ends, the payment may increase, depending on the rate.
How to set up automatic minimum payments
Setting up automatic minimum payments can help ensure a cardholder doesn’t miss a payment due date. The process for setting up minimum payments might vary depending on the card issuer.
Capital One cardholders can set up AutoPay to make automatic monthly credit card payments. Capital One bank customers can also set up Bill Pay from their bank accounts.
Credit card minimum payment FAQ
Learn more about credit card minimum payments.
Is it possible to make multiple credit card payments in one month?
One way to pay more than the minimum payment is to make multiple credit card payments in a month. After making the minimum payment on time, any additional payments could help decrease the balance faster and help reduce the interest charged over time.
Does making minimum payments affect credit reports and credit scores?
Credit bureaus like Experian®, Equifax® and TransUnion® compile credit reports based on a person’s credit history. Information in those reports is used to calculate credit scores. According to Equifax, even one late or missed payment could impact credit scores and reports.
So making on-time payments, even if they’re minimum payments, may be helpful to your credit scores. If you only pay the minimum payment, it may take longer to lower your balance and your credit utilization ratio. And credit utilization ratio, which is the percentage of the total available credit you’re using, is an important factor in determining credit scores.
If you pay the minimum payment, is there interest?
If you pay only the minimum amount due, you may be charged interest on any remaining unpaid balance.
Key takeaways: Credit card minimum payment
When you make the minimum payment on your credit card each month, it can help you keep your account in good standing and avoid late fees. But routinely making only the minimum payment while carrying a balance can mean paying off credit card debt slowly, especially if you make new charges each month.
You can look into options to save on interest with Capital One’s balance transfer credit cards. You can get pre-approved today—with no harm to your credit.
