Guide to credit card minimum payments

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Each month you have the option to make the minimum payment on your credit card bills—and sometimes, that option seems pretty tempting. Why not end the month with a little extra cash in your pocket? Is there any downside to only making the minimum payment on your credit cards?

Well, it all depends. Making at least the minimum payment on your credit cards is an important part of building a positive credit history, which means that you can make the minimum payment every month and still remain in good standing with your creditors. However, if you only make the minimum payment on your credit cards, it will take you much longer to pay off your balances—sometimes by a factor of several years—and your credit card issuers will continue to charge you interest until your balance is paid in full.

What is a minimum payment, and how is it calculated? How much will your minimum credit card payment be? What happens if you only make the minimum payment on your credit cards, and what happens if you pay less than the minimum? Let’s take a close look at making a credit card minimum payment—and why it’s a good idea to pay more than the minimum every month, if you can.

What is the minimum payment on a credit card?

A credit card minimum payment is the lowest amount you can pay every month while still remaining current on your account. Making at least the minimum payment on your credit cards every billing cycle ensures that you do not get stuck with late fees, penalty APRs or derogatory marks on your credit report.

While it’s a good idea to make more than the minimum payment every month—especially because your credit card issuer will charge interest on any balance remaining after you make your credit card minimum payment—making at least the minimum payment on your credit cards is one of the best things you can do to maintain a positive credit history.

How is a minimum payment on a credit card calculated?

A credit card minimum payment is usually calculated as a flat percentage of your total balance, although some credit card issuers may add new interest, fees and/or past due amounts to your minimum payment.

To find out how your minimum payment is calculated, check your credit card’s terms and conditions. If you have the Capital One Quicksilver Cash Rewards Credit Card, for example, your minimum payment will be either $25 or 1 percent of your balance (whichever is greater), plus new interest, late payment fees and any past due amounts. Some credit card issuers do not include credit card minimum payment calculators in the list of rates and terms, so if you can’t find any information about how your minimum payment is calculated, contact your credit card issuer and ask “How much will my minimum credit card payment be?”

Do I have to pay my card’s minimum payment?

While you technically “don’t have to” make minimum payments on your credit cards, skipping credit card payments is always a bad idea. When you ignore your credit card bills, you damage your credit score, add derogatory marks to your credit report and run the risk of having your credit cards sent to collections.

Even paying less than the minimum on your credit cards has serious consequences. Credit card issuers treat any credit card payment below the minimum as a missed payment, which can have negative effects on your credit score and credit history.

That said, continuing to make payments on your credit cards even when you can’t afford to pay the minimum shows the credit card companies that you have not given up on paying back your debt—which can help you when it comes time to request credit card forbearance or negotiate a debt settlement.

What happens if I don’t?

If you don’t make the minimum payment on your credit card, your missed payment will be reported to the three major credit bureaus: Equifax, Experian and TransUnion. The missed payment will appear as a derogatory mark on your credit history, and the negative mark could remain on your credit reports for seven years.

Your missed minimum payment will also have a negative effect on your credit score. The two most popular credit scoring services, FICO and VantageScore, both consider payment history a major factor in determining your credit score—so missing a payment or paying less than the minimum could have a significant impact.

How not paying your card’s minimum affects your credit score

Not making a credit card minimum payment can have a serious negative effect on your credit score. Your payment history makes up 35 percent of your FICO credit score and 40 percent of your VantageScore 3.0 credit score. The VantageScore 4.0 credit score, which uses trended data to track credit behaviors over time, lists payment history as “moderately influential” in determining your credit score.

What does all this mean for you? Try to make at least the minimum payment on your credit card every month. Making on-time payments is one of the most important parts of building good credit, and missing payments—or paying less than the minimum—is one of the quickest ways to damage your credit.

Why you should pay more than the minimum

Making a credit card minimum payment may seem like a good idea, but it’s an even better idea to pay more than the minimum on your credit cards. Why? Because when you carry a balance on your credit cards, your credit card issuer will charge interest on your debt—and when you only make the minimum payment on your credit cards, those interest charges can quickly add up.

Want to know exactly how much money it’ll cost you if you only make the minimum payment on your credit cards? Thanks to the Credit CARD Act of 2009, your credit card issuers are required to tell you. Check your monthly credit card statement for a box labeled “Minimum Payment Warning.” This box will tell you how long it will take you to pay off your debt if you only make the minimum payment on your credit cards, as well as how much money you’ll pay in total—an amount that will probably be significantly higher than your current credit card balance.

You can also use a credit card minimum payment calculator to learn how long it will take you to pay off your credit cards if you only make the minimum payment every month. Then, use a debt repayment calculator to learn how much money and time you can save by making more than the minimum payment.

Here’s a quick overview of how long it can take to pay off a balance if you only make the minimum payment on your credit cards every month—and how much interest can accrue over time. In this example, you’re paying off a credit card with a $1,000 balance and a 17 percent interest rate, in which the minimum payment is calculated at 1 percent of the balance plus new interest.

Month Minimum Payment Interest Paid Principal Paid Remaining Balance
1 $24.17 $14.17 $10.00 $990.00
2 $23.92 $14.02 $9.90 $980.10
3 $23.69 $13.88 $9.81 $970.30
4 $23.45 $13.75 $9.70 $960.59
5 $23.21 $13.61 $9.60 $950.99
6 $22.98 $13.47 $9.51 $941.48
7 $22.75 $13.34 $9.41 $932.07
8 $22.53 $13.20 $9.33 $922.75
9 $22.30 $13.07 $9.23 $913.52
10 $22.08 $12.94 $9.14 $904.38
11 $21.86 $12.81 $9.05 $895.33
12 $21.64 $12.68 $8.96 $886.37

As you can see, at the end of your first year you’ll have made $274.58 in payments while only reducing your $1,000 balance by $113.63. If you continued to only make the minimum payment, it would take you over nine years to pay off your debt—during which time you’d pay $857.52 in interest charges.

Tips for making your minimum payment

If you need help making a credit card minimum payment, you have a few options. You might want to take a look at your household budget—or create a budget, if you don’t have one—and find areas in which to cut back on your spending. Canceling a few streaming services or cutting back on takeout meals, for example, could help you set aside enough money for your credit card minimum payments.

If there isn’t any wiggle room in your budget, it might be time to look for ways to earn more money. According to a 2019 Bankrate survey, nearly half of U.S. workers have a side hustle, and three out of 10 people use that money to pay for everyday living expenses—including credit card minimum payments.

If you’re still coming up short, you can always contact your credit card issuer and ask them to reduce your minimum payment. Credit card companies have hardship programs designed to help people who are going through periods of financial difficulty, so take advantage of any assistance your issuer can offer.

The bottom line

Making the minimum payment on your credit cards will help you stay current with your credit card issuers, but it won’t help you pay off your credit card debt. If you want to avoid interest charges and pay off your balances in full, you’re going to need to make more than the minimum payment on your credit cards. Otherwise, you could end up paying a lot of extra money in interest—and you might stay in debt for much longer than you realize.