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 what you need to do in order to avoid late fees and have a good repayment history reflecting on your credit report. It is calculated based on a very small percentage of your total credit balance. 

Now, what you need to know about this is that when you only keep paying the least amount on your credit cards, you will end up taking much longer 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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What Does it All Mean?

Well, it is quite tempting to be making a small minimum payment toward your credit card bill, but as we mentioned above, this can end up being more expensive than you think.

So, when you receive your bill, there are usually three amounts that you can pay: the minimum due, the current balance, and the statement balance.

The minimum is the smallest amount, which is why it is 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 payment can work then.

How Is it Calculated? 

The minimum payment is calculated differently from bank to bank, but the most common “floor” amount set is usually around $25 or $35. This is the least amount you can be charged.

Now, if your statement balance is less than the floor amount, your minimum payment will then be the total balance. If the floor amount is $35 and your balance comes to around $10, then the minimum payment may be equal to $10.

While it is vital to at least make the minimum, it’s not the most ideal situation to keep carrying your balance from one month to another. What happens is that you will end up racking up high-interest charges and risk falling into debt.


Minimum Monthly Payments - What's the Deal?
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When you make the minimum payments of $25 each month, it can take you an estimated 4 years to clear a credit card balance of around $800. Now, that is just too much time to pay such a small amount of money.

The consequences of paying the minimum are that it will cost you so much more, and most people pay off their balances in full just to avoid the high-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.

So, what you can do is to try and clear your debts, by finding a new credit card that has an offer of 0% APR and transfer all the balances onto the card, so you can be servicing one card at a time.

Finally, you should always try to limit your utilization rate on all the cards to below 30%. This keeps you at a nice amount and ensures that you can manage your payments.