Credit card minimum payments: What you need to know
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“Verified by an expert” means that this article has been thoroughly reviewed and evaluated for accuracy.
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Published 5:00 a.m. UTC Nov. 23, 2023
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When you make a purchase with a credit card, it can feel like using free money. In reality, however, you have to pay the credit card company back for the purchase.
Fortunately for most people, you don’t have to pay the full balance back all at once. Instead, you can make minimum monthly payments that are just a portion of what you owe.
By paying the minimum amount due each month, you keep your account in good standing and build up your credit scores. But if you miss a minimum payment, you can face severe penalties, including damage to your credit scores.
What is the minimum payment on a credit card?
The minimum payment on a credit card is the minimum amount you have to pay in order to avoid penalties each month. You can pay more than the minimum amount due — and it’s a good idea to pay off the whole balance if you can — but paying less can result in late fees and a hit to your credit scores.
How do I know how much my minimum payment Is?
You can find the minimum payment due on your credit card by logging into your online account for the card, or by viewing your billing statement. The amount you need to pay for the billing period should be listed as the “Minimum Payment Due.”
If you get a paper statement for the account you’ll also find the minimum payment listed on the statement.
How to calculate your minimum credit card payment
Your issuer will calculate your minimum monthly payment for you and it should appear on your monthly, but not all issuers calculate the minimum payment the same way. Your creditor may use any of the following to determine your minimum credit card payment:
- A set percentage of your statement balance.
- A percentage of your balance, plus interest and fees.
- A flat monthly payment amount.
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How do credit cards minimum payments work?
For each month you owe a balance on your credit card, you’ll have a minimum amount you’re required to pay. That means you don’t have to pay your full balance all at once, but instead, you can break the payment down over months or even years.
But making just the minimum monthly payment can be both good and bad for you. When you cover the minimum amount due, you stay in good standing with your creditor. However, you also rack up interest charges for each month you carry a balance on your card. With the average credit card APR interest at 22.77% as of September 2023, those interest charges can add up fast.
Does making the minimum payment affect credit scores and credit reports?
Making the minimum payment on your credit card can affect your credit reports and scores in a few different ways.
When you make the minimum payment, your credit reports will show that your payment is current for that month. Thirty-five percent of your FICO credit score calculation is based on your on-time payments, so each payment you make on time helps you build a positive credit history.
On the other hand, making just the minimum payment means you aren’t paying down your balance very fast. Having a large balance can hurt your credit utilization ratio, which makes up 30% of your FICO Score calculation. If you want to improve your credit utilization, the best thing you can do is keep your credit card balances below 30% of your credit limit.
What happens if I don’t make the minimum payment on my credit card?
If you don’t make the minimum payment on your credit card by the due date, you can face significant penalties. The more payments you miss, the worse the penalties get, and they can include:
- Late fees.
- A late payment reported on your credit reports for seven years.
- Loss of points from your credit scores.
- An increase in your interest rate, also known as a penalty rate.
- Account closure or charge-off to collections (after multiple missed payments).
Tips to manage minimum payments
There are a few ways you can stay on top of your minimum credit card payment each month and avoid late penalties.
One of the easiest ways is to set up autopay on your credit card. You can do this by logging into your account and selecting either a set amount to pay each month, or authorizing your creditor to process an automatic payment for the minimum amount due.
If your minimum payment isn’t affordable, there are strategies you can use to reduce the bill or get help managing your debt. Consider any or all of the following:
- Contact your creditor and request a later payment due date.
- Ask your creditor for hardship assistance, which could include a temporary reduction in your payment amount.
- Consolidate your credit card debt with a balance transfer credit card that gives you lower monthly payments during the 0% introductory APR period.
- Contact a nonprofit credit counseling agency to see if you qualify for a Debt Management Plan (DMP) or other assistance.
You should pay at least the minimum amount due on your credit card in order to avoid late fees and damage to your credit scores. If you pay more, however, you can reduce your interest charges and become debt-free sooner.
For most credit cards, the minimum monthly payment changes from one month to the next. If your creditor requires you to pay a percentage of your statement balance, your minimum payment will fluctuate as your balance goes up and down.
You get multiple benefits from paying more than the minimum required amount on your credit card. By paying extra, you can reduce your interest charges and improve your credit utilization ratio, which in turn, helps raise your credit scores.
Making just the minimum payment can both help and hurt your credit. It helps because on-time payments build up a positive payment history on your credit reports, but it can hurt your scores if you carry a high credit card balance from month to month.
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