What is a credit card?
Credit cards are important financial tools that make rewarding everyday spending simple, but it requires smart financial habits, on-time payments and low balances to really reap the reward.
4 min read
Sep 30, 2022
Minimum payment
Minimum payment is a common term. Learn more about it at Bankrate.com.
What is a minimum payment?
A minimum payment is the least amount owed on a debt by a set due date without incurring penalties. Minimum payment is a term commonly associated with credit card accounts.
Deeper definition
A minimum payment is determined by the total balance owed on the account and the interest rate. Credit card customers receive a monthly bill notifying them of the minimum payment amount, as required by the Credit Card Accountability Responsibility and Disclosure Act, or CARD Act.
Consumers are encouraged to pay more than the minimum payment to avoid interest charges piling up. Paying just the minimum due each month can lead to hundreds or thousands of dollars in additional costs and keeps a person in debt longer. In certain circumstances, the debtor can ask the lender to lower the interest rate or minimum payment.
Minimum payment examples
Janie owes $5,000 on her only credit card, which has a 14.99 percent interest rate. Her monthly minimum payment is $100. But if she pays only the minimum every month, it will take Janie 79 months, or more than six years, to pay off her balance. Janie’s goal is to pay off the card in two years. She uses Bankrate’s credit card calculator and figures that she must pay $242.41 per month in order to pay off her balance in two years.
Compare credit cards offers and find today’s best rates at Bankrate.com.
More From Bankrate
-
-
How to get preapproved for a Chase credit card
Chase makes it easy to see if you prequalify for one of its top rewards cards.
5 min read Sep 30, 2022 -
How to apply for a credit card and get approved
Use this guide to help you through the credit card application process. Learn everything you need to do to apply for a credit card and increase your chances of approval.
10 min read Sep 30, 2022 -
How old do you have to be to get a credit card?
Getting a credit card at 18 is technically possible, but it’s not that simple.
3 min read Sep 30, 2022 -
How to pick the right credit card for you
Think about your credit score, spending habits and financial goals when choosing a new credit card.
7 min read Sep 30, 2022 -
Q4 2022 Chase Freedom Flex categories: another good quarter ahead
The Chase Freedom Flex’s fourth-quarter 2022 bonus categories look like winners.
3 min read Sep 30, 2022 -
Can a credit card charge a late fee on a late fee?
Late fees get charged interest once they’re part of your balance.
3 min read Sep 30, 2022 -
Do I have to pay off credit card debt that’s been sold to a collector?
Debts, unlike fine wine and my wife, do not improve with age. Unpaid debt doesn’t go away. Until the debt is either paid or forgiven, you still owe the money. This is true even if it’s a credit card [...]
5 min read Sep 30, 2022 -
Amex EveryDay Credit Card vs. Blue Cash Everyday Card from American Express
If your family spends a lot on groceries each month, you should check out these cards.
6 min read Sep 29, 2022