Minimum payment

The minimum payment is the line between an account in good standing and a late one. Pay at least that much by the due date and there is no late fee, no penalty rate and no missed payment on your record. It is set by a formula in the card's terms, and the formula is built to be small. On a common formula, 1% of the balance plus the month's interest, two thirds of the $90 minimum on a $3,000 balance at 24% APR is interest, and only $30 touches what you owe, which is why a balance paid at the minimum takes more than fifteen years to clear.

In a sentence

• "The minimum payment on the $3,000 balance is $90, and $60 of it is interest."
• "Autopay was set to the minimum payment rather than the statement balance, so the card has been charging interest all year."
• "Pay the minimum payment to stay current, and pay the statement balance to stay out of interest."

How it's calculated

Each card's terms state its own formula. A common one is the greater of a floor, such as $25, or 1% of the balance plus the interest and fees charged that month; some cards use a flat share of the balance instead. When the balance is below the floor, the minimum is the whole balance.

Minimum payment = the greater of the floor, or 1% of the balance + this month's interest + fees (a common formula)

1. The statement closes, and the issuer applies the formula to the new balance to print the minimum and the due date.
2. Paying at least the minimum by the due date keeps the account current. Paying less, or later, is a late payment.
3. Whatever is not paid is carried at the APR, and unless the statement balance was paid in full, new purchases accrue interest from the day they are made, because the grace period is lost.
4. Next month's minimum is recomputed on the smaller balance, so it shrinks as the balance shrinks, and a payoff at the minimum slows down as it goes.

An example

A $3,000 balance at 24% APR, the example's assumptions, with no new purchases.

The minimum falls by about a dollar a month. Run to the end, with the balance charged a twelfth of the APR each month, four plans come out like this.

Holding the first minimum steady instead of letting it shrink finishes 127 months sooner and saves $2,894 of interest, without ever paying more than the card asked for in month one.

Why it matters

The minimum is set for the issuer's benefit, not the borrower's: it keeps the account current and the balance earning interest. The decision it changes is the autopay setting. Set to the statement balance, the card is paid in full every month and never charges interest; set to the minimum, it carries everything else at the APR and loses the grace period on new purchases. When a balance has to be carried, the workable plan is a fixed payment above the minimum, held there as the balance falls, since the shrinking minimum is what turns a two-year payoff into a fifteen-year one. The mistake the term prevents is reading the minimum as what you owe this month; what you owe is the statement balance.

Minimum payment versus statement balance

The minimum payment keeps the account current; the statement balance, paid in full by the due date, keeps it free of interest. The statement balance is everything owed at the close of the billing cycle, and paying it in full preserves the grace period on the next cycle's purchases. Anything between the two, paid on time, is neither late nor interest-free: the remainder carries at the APR, and new purchases accrue interest until a statement balance is paid in full again. See How to budget with a credit card without overspending for the routine that keeps the statement balance the number on autopay.

Common questions

Is the minimum payment the same as the statement balance? No. The statement balance is the whole amount owed at the close of the cycle; the minimum is the small part of it the issuer requires by the due date. Paying the statement balance avoids interest; paying the minimum avoids only the late fee.

What happens if I only pay the minimum? The account stays current, the rest carries interest at the APR, the grace period on new purchases is lost, and the minimum shrinks with the balance so the payoff stretches out. On a $3,000 balance at 24% it takes 183 months and costs $4,887 in interest.

Does paying the minimum hurt my credit score? A payment of at least the minimum, on time, is recorded as an on-time payment, which is what the payment-history part of a score measures. The balance carried counts toward credit utilization, the share of your limits in use, the other heavily weighted factor, so a minimum-only balance affects the score through the balance rather than the payment.

Why did my minimum payment go up? Because the balance grew, from purchases, interest or a fee; because a promotional rate ended and the interest in the formula rose; or because a late fee was added and is due with the minimum.

Is a loan's minimum payment the same idea? No. An installment loan's scheduled payment is sized to retire the whole loan by the end of the term, so paying exactly that amount every month finishes it. A card's minimum is sized only to keep the account current, and paying exactly that finishes the balance years later, if ever.

Go deeper

• The Credit card payoff calculator shows how long a balance takes to clear at the payment you make now, what the interest costs, and what to pay each month to be done by a date you choose.
• How to budget with a credit card without overspending budgets each purchase on its own day and pays the statement in full from money already counted as spent.
• Debt snowball versus debt avalanche pays every minimum and sends everything extra to one balance at a time.

Where it shows up in Zypper

Zypper does not set the minimum, but it keeps the payment in view. Each credit card payment is identified as a recurring group from the pattern of your transactions, with its next expected payment and amount and its status on the recurring page, and the Upcoming payment expected notification emails you before an expected payment. When the payment leaves checking and arrives on the card, both sides show up as transactions and Zypper links them as one transfer, not income and spending, so the payment never reads as spending. See Recurring transactions and bill tracking and Splitting and linking transactions for the details, or get started with Zypper to see the next payment before it is due.