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How Are Credit Card Minimum Payments Calculated

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store-credit-cards-suckCredit cards seem like simple tools. Cardholders swipe their cards at retailers, incur charges, and must pay their balances with any applicable interest. Of course, it is the payments that create the more confusing aspects of credit cards.

Cardholders can pay their balances in full each month to avoid interest, or they can finance their charges over time. Yet the most cash strapped cardholders will be concerned with making only the minimum payment required, but how is this calculated?

It depends

Unlike so many other terms of credit cards that are the subject of regulations, each card issuer is free to calculate the minimum payment amount using a separate formula. For example, American Express charges the the interest plus 1% of the new balance, excluding any overlimit amount, penalty fees, interest charges, with a minimum of $35.  Then, they add any penalty fees and 1/24th of any overlimit amount plus any amount past due.

On the other hand, Capital One simply charges 3% of the credit balance, or $15, whichever is greater. Chase charges either 2% of the new balance or the sum of 1% of the balance plus interest charges and late fees.  In either case, the minimum payment will be at least $10. Discover charges $35, or 2% of the cardholder’s new balance on their billing statement, or any interest charges and late fees on the statement plus $20; whichever is greater.


There is no simple way to figure out what the minimum payment will be for a credit card bill in general. Cardholders have to research their particular card issuer, and find out what formula is used. These formulas will be found in the cardholder agreements, but thankfully, the calculation is the same for all of the different credit cards issued by each bank.

Most importantly, cardholders should do their best to always pay more than the minimum payment. Doing so will allow them to incur far less interest charges while retiring their debt sooner. Minimum payments are one of the more complicated parts of credit card use, but most cardholders should make that small of a payment anyways.

Editor's Note: This content is not provided by Citi. Any opinions, analyses, reviews or recommendations expressed here are those of the author's alone, and have not been reviewed, approved or otherwise endorsed by the Citi or any of the other companies whose products are featured in this content.

About the author

Jason Steele

Jason Steele is a freelance journalist specializing in personal finance and travel and is recognized as an expert in credit cards. He is a regular contributor to many of the top personal finance sites such as Wise Bread and Money Talks News. His work has been frequently carried on mainstream news outlets such as MSN Money, Yahoo, Finance, and Business insider.

Jason lives in Denver Colorado with his wife and two daughters.

– has written 431 posts.

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