# Credit Card Minimum Payment Calculation

Your credit card minimum payment is the least amount you can pay toward your credit card balance without being penalized with a late fee and possible interest rate increase. 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. Sometimes it's lower. Sometimes it's higher.

Since your minimum payment can vary each month, it can be difficult to budget for your monthly credit card payment, unless you understand how your minimum payment is calculated. Once you know how your credit card issuer calculates your minimum payment, you can estimate your own minimum payment to predict how much you'll need to pay on your credit card each month.

### Method 1: Percent of the Balance

Some credit card issuers calculate the minimum payment as a percent of the balance, typically between 2% and 5%. They use the balance at the end of your billing cycle to calculate the minimum payment due.

For example: Your minimum payment is 2% of your balance and you have a \$1,000 balance. Your minimum payment is calculated as: 1000 X .02 = \$20.

### Method 2: Percent of the Balance + Finance Charge

Your minimum payment may be calculated by taking a percent of the balance at the end of the billing cycle and adding the monthly finance charge

For example: Your minimum payment is 1% of your balance. Your credit card balance is \$1,000. Your credit card APR is 12% and your finance charge for the month is \$10. Assuming you owe no fees, your minimum payment would be \$10 + \$10 = \$20.

Penalty fees and past due payments may be added to the regular minimum payment increasing the amount of your minimum payment for that month. This would increase your minimum payment significantly.

Also, your credit card issuer may add any amount that exceeds your credit limit to your minimum payment. For example, if your balance is \$1,050 and your credit limit is \$1,000, your minimum payment may be 2% of the balance = \$21 + \$50 = \$71.

Once you catch up, pay the past due amount, and bring your balance below the credit limit, your minimum payments should decrease.

### How Is Your Minimum Payment Calculated?

You can find out which method your credit card issuer uses by reading your credit card agreement. Look for a section titled "How your minimum payment is calculated" or "Making payments." If you're reading an electronic version of your credit card agreement, you can use the Find function (Ctrl+F or Cmd+F) to located the words "minimum payment." A customer service representative can also help you figure out how your minimum payment is calculated.

### Reasons Your Minimum Payment May Increase

There are a few reasons your minimum payment could increase from one month to the next.

• You were late on a previous payment.