When you receive your credit card statement, you'll see a "minimum payment due."
This is the smallest amount you are required to pay by the due date to keep your account in good standing and avoid late fees and potential damage to your credit score.
However, paying only the minimum can be a very expensive strategy due to compounding interest.
How is the Minimum Payment Calculated?
The calculation for a credit card's minimum payment can vary slightly between card issuers, but it generally follows a formula that includes a percentage of your balance and potentially a fixed fee. A common formula is:
Let's break down the components used in our calculator:
Current Balance: This is the total amount you owe on your credit card at the time of the statement closing date.
Minimum Payment Rate: This is the percentage of your current balance that the credit card company requires you to pay. This rate is often around 1% to 3%, but can be higher. It's important to check your cardholder agreement for the exact rate.
Fixed Fee: Some credit card companies add a small fixed dollar amount to the minimum payment calculation. This is often a nominal amount, like $10 or $25, to ensure a baseline payment regardless of a very small balance. If your card doesn't have a fixed fee, you can leave this field blank or enter 0.
Important Note: Most credit card agreements also specify a floor for the minimum payment. This means that even if the calculated amount (percentage of balance + fixed fee) is very low, you might still be required to pay a minimum amount, such as $25 or $35. Our calculator uses the standard formula, but it's always wise to check your statement for the exact minimum due.
Why You Should Pay More Than the Minimum
While paying the minimum keeps your account current, it's rarely the best financial strategy. Credit cards typically have high Annual Percentage Rates (APRs). When you only pay the minimum, the vast majority of your payment goes towards covering interest charges, and only a small portion reduces your principal balance. This can lead to:
Extended Debt Payoff: It can take years, even decades, to pay off a balance if you consistently pay only the minimum.
Increased Total Cost: You end up paying significantly more in interest over the life of the debt than the original amount you borrowed.
Difficulty Improving Credit: While paying the minimum avoids negative marks, a high balance relative to your credit limit (high credit utilization) can still negatively impact your credit score.
To save money and pay off your debt faster, aim to pay as much as you can above the minimum payment each month. Even a small increase can make a substantial difference over time.
function calculateMinimumPayment() {
var currentBalance = parseFloat(document.getElementById("currentBalance").value);
var minimumPaymentRate = parseFloat(document.getElementById("minimumPaymentRate").value);
var fixedFee = parseFloat(document.getElementById("fixedFee").value);
var minimumPaymentResult = 0;
// Validate inputs
if (isNaN(currentBalance) || currentBalance < 0) {
alert("Please enter a valid current balance.");
return;
}
if (isNaN(minimumPaymentRate) || minimumPaymentRate < 0) {
alert("Please enter a valid minimum payment rate.");
return;
}
if (isNaN(fixedFee) || fixedFee < 0) {
// If fixed fee is not entered or is invalid, treat it as 0
fixedFee = 0;
}
// Calculate minimum payment based on the common formula
// Minimum Payment = (Minimum Payment Rate * Current Balance) + Fixed Fee
var calculatedPayment = (minimumPaymentRate / 100) * currentBalance + fixedFee;
// Ensure the result is not negative (though unlikely with valid inputs)
minimumPaymentResult = Math.max(0, calculatedPayment);
// Display the result, formatted to two decimal places
document.getElementById("minimumPaymentResult").innerText = "$" + minimumPaymentResult.toFixed(2);
}