Minimum Monthly Payments – What’s the Deal?

The minimum monthly payment is the least amount of money you are required to pay on your credit card account per month in order to remain in good standing with the credit card company.

Making this payment on time is important if you want to avoid late fees and have a good repayment history reflected on your credit report.


However, there are important things to note about only making the minimum monthly payment. For example, when you only pay the least amount on your credit cards, it will take a long time to pay off the card balances. Read on to learn more about minimum monthly payments.

Minimum Monthly Payments - What's the Deal?
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The Three Payment Types

It is quite tempting to make only small payments toward your credit card bill, but this can end up being more expensive than you think.

When you receive your bill, there are usually three payment types available to make. These types are the minimum amount due, the current balance, and the statement balance.


The minimum amount is the smallest, which is what makes it the most attractive. The statement balance is the total amount on your account for that billing cycle, while the current balance is the total amount of your recent bill plus all other charges.

According to finance experts, it is recommended that you should pay the statement balance in full each month, but of course, sometimes it’s not always possible. If you are not able to do so, the minimum monthly payment can work then.

How Is the Minimum Monthly Payment Calculated?

The minimum payment is calculated differently from bank to bank, and can range from $10 to $35. The “floor” amount is is the least amount you will be charged each month.


Now, if your statement balance is less than the floor amount, your minimum payment will then be the total balance. For example, if the floor amount is $35 and your statement balance is $10, then the minimum payment required will be $10.

While it is vital to pay at least the minimum, it’s not the most ideal situation to keep carrying your balance from one month to another. By doing so, you will end up rack up high-interest charges and risk falling into debt.

Don’t Get Stuck In the Minimum Payment Trap

Here’s an example of what it looks like when you only make the minimum payment on your credit card balance.

Say for example you only make the minimum payment amount of $25 each month on a card balance of $800. This will take you an estimated four years to clear the credit card balance to $0, when you account for having to pay for the interest on top of that $800.

This means you’ll spend $1,200 paying off an $800 balance. The consequences of only paying the minimum can be expensive so pay off your balance as soon as you can to avoid interest charges.


If you constantly find yourself just paying the minimum amount each month, it could be a sign of a much bigger problem at hand. One is that you could be living beyond your means. On the other hand, you could be having way too many credit cards that you cannot pay.

For help in clearing your debts, try finding a new credit card that has an offer of 0% APR and transfer all the balances onto the card, so you can make a singular payment each month with no interest.

Finally, you should always try to limit your utilization rate on all the cards to below 30%. This benefits your credit score and ensures that you can manage your payments.