Credit & Debt

What is Minimum Payment?

A minimum payment is the smallest amount you must pay each month to keep your credit card account current and avoid late fees. It's typically 1% to 2% of your balance plus interest and fees.

Paying the minimum keeps you in good standing, but it barely touches the principal. Interest keeps piling up on the remaining balance, which means it can take years—and cost a fortune—to pay off what you owe.

Under the Credit CARD Act, your statement must show a Minimum Payment Warning that tells you how long it'll take to pay off the balance with minimum payments vs. paying it off in three years.

Quick Facts

Payment ImpactAvoids late fees but does not stop interest

Typical Calculation1% to 2% of balance plus interest/fees

CARD Act RequirementMinimum Payment Warning must be on statements

Delinquency CheckFailure to pay minimum triggers delinquency

PRACTICAL EXAMPLE

On a credit card balance of $5,000 at 20% interest, the minimum payment is $125. Paying only the minimum will take over 11 years to pay off the balance and cost more than $5,000 in interest charges.

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RELATED TERMS

Learn More Key Concepts

Credit ScoreA three-digit number that tells lenders how likely you are to repay borrowed money.

Credit LimitThe maximum amount of revolving credit a lender permits a borrower to carry on a credit card or line of credit.

Interest ChargeThe monthly cost of borrowing funds on credit, calculated using the Annual Percentage Rate and the average daily balance.

Balance TransferThe process of moving outstanding debt from one credit card to another, typically to secure a lower interest rate.

DelinquencyThe state of being behind on debt payments, starting the day after a missed payment due date.

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