Here's How Your Minimum Credit Card Payment Is Calculated

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Every credit card issuer has its own process for calculating your minimum balance. Worse, that process can vary based on everything from which card you have to your credit score to your payment history with the issuer.

That said, there are a few general rules of thumb that apply in most cases to most issuers. Use these as a guideline for your planning, not as hard-and-fast rules.

For balances below $20 to $40

Issuers typically have a specific floor for minimum payments, often between $20 and $40. If your credit card balance is below this number, then your minimum payment will be equal to your statement balance.

Example: The issuer's default minimum payment amount is $35. Your balance is $15, so your minimum payment will be $15.

Up to a point, you'll get a flat rate; then a percentage

For larger balances, your minimum payment amount will be either a flat rate or a percentage of your credit card balance -- whichever is higher.

Example: The issuer's minimum payment is either $40 or 2% of your balance, whichever is higher. If your balance is $1,500, then your minimum payment would be $40, since $1,500 x 0.02 = $30, which is less than $40. But if your balance was $5,000, your minimum payment would be $5,000 x 0.02 = $100.

Past due balances are also added on

Most issuers will add your late fee and past due balance to your minimum payment for the next statement period. You'll need to pay off the entire past due balance to get your account back into good standing.

Minimums may include interest fees

If you carried a balance from last month -- and you don't have an intro 0% APR offer -- then you'll be charged interest on that balance. The majority of issuers will include those interest fees in the minimum payment amount for your next statement period.

How to find your card's minimum payment details

The minimum payment you owe for any given statement period will be included on your bill for that period. It should also be listed next to your statement balance pretty prominently when you log in to your online banking account or mobile banking app.

Unfortunately, because there are so many variables at play, most issuers don't publically post how minimums are calculated. You may find information on your specific cards in the terms and conditions sent with your card in the mail or through online documents.

You can also try chatting with your card issuer through the mobile app or online banking. (Or you could go old-school and stop into a bank branch -- if your issuer has those -- to talk to a human in person.)

Should you pay just the minimum?

Not if you can help it. If you have the means to pay more, then pay more.

To be clear, you should always pay at least the minimum you owe. The minimum payment amount is the absolute least you need to pay to keep your account in good standing.

But it's definitely not the minimum you should pay if you want to avoid paying a fortune in interest fees. Any carried balance (minus an interest rate offer) will accrue interest. Credit card best practice is always to pay your balance in full before the due date every month.

If your minimum payment is too much

Life happens. When it does, you aren't out of options. Issuers want to help you pay your debt. Charge-offs are expensive for everyone involved.

If you're struggling to keep up with your minimum payments, contact your issuer ASAP. A lot of card issuers will work with you to set up a payment plan and get you back on track.

The downside here is that this could lead to the issuer cutting your credit limit or even closing your account once you've paid it off. But this is still a better outcome than defaulting on your card and having a charge-off on your credit for the next seven years.

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