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Credit Card Minimum Payment Calculation

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Your credit card minimum payment is the minimum amount you can pay toward your credit card balance without being penalized. If you pay attention to your billing statement each month, you've probably noticed that your minimum payment can change from one month to the next. Once you understand the credit card minimum payment calculation, you'll know why your minimum payment changes.

Percent Plus Fee Method

There are two basic methods credit card issuers use to calculate minimum payments. Some use the percent + fee method. Your credit card balance is multiplied a certain percent (typically between 1% and 3%) then any fees, e.g. late fees, are added.

For example: Your minimum payment is 2% of your balance. You have a $1000 balance. Your minimum payment is calculated as: 1000 X .02 = $20.

Percent Plus Finance Charge Method

The other method the percent + finance charge + fee. Your credit card balance is multiplied by a certain percent, then finance charge and fees are added to come up with your minimum payment.

For example: Your minimum payment is 1% of your balance. Your interest rate is 12%. Your credit card balance is $1000. Assuming you owe no fees, your minimum payment would be $10 + $10 = $20.

The Method Your Creditor Uses

You can find out which method your credit card issuer uses by reading your terms and conditions. A customer service representative can also help you figure out how your minimum payment is calculated.

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