Glossary
Minimum payment
A credit card's minimum payment is the least you must pay by the due date to keep the account in good standing, usually 1% of the balance plus interest, or 2% to 4% of the balance, with a floor of about $25 to $40.
Paying only the minimum keeps you current but takes years and costs a lot of interest, because the minimum shrinks as the balance does. Statements must show how long minimum payments would take and the payment that clears the balance in three years.
Example
$5,000 at 24% APR, paying only the minimum
- First minimum
- 1% of the balance plus interest, at least $35
- $150
- Time to pay it off
- The minimum, every month
- 16 years
- Interest you pay
- On top of the $5,000
- $8,442
What you pay in all$13,442
$5,000 you borrowed$8,442 of interest
Where you’ll see it on RateHerald
Related terms
- APR (annual percentage rate)The yearly cost of borrowing as a percentage: on a credit card, the interest rate on balances you carry; on a loan, the interest rate plus certain fees.
- Statement balanceA credit card's statement balance is what you owed when the billing cycle closed; paying it in full by the due date avoids interest on purchases, while the current balance also includes charges since then.
- Penalty APRA higher interest rate, often near 30%, that a card can charge after you pay late: on new purchases with 45 days' notice, and on existing balances once a payment is 60 days late.
Sources: CFPB: Regulation Z, 12 CFR 1026.7