JagInsights › Glossary › Minimum payment
What is a credit-card minimum payment?
The minimum payment is the smallest amount the issuer will accept this month. Why paying only that keeps the balance alive for years.
The minimum payment is the floor the card issuer will accept by the due date. It is usually a small percent of the balance plus interest and fees, or a dollar floor, whichever is larger.
Worked example
A $2,000 balance at 22 percent APR with a $50 minimum does not fall by $2,000 divided by $50. About $37 of that $50 is interest, so the balance drops by about $13. At that pace the payoff is measured in years.
Why it matters
The minimum is designed so the account stays current, not so the debt ends. Current is not the same as done.
Questions people ask
Does paying the minimum protect my credit score?
It protects payment history. It does not shrink utilization much, and utilization is a large part of many scores.
Is the minimum the interest only?
No. It is interest plus a slice of principal, often a thin slice.
What if I pay more than the minimum but not in full?
Extra dollars above the minimum usually go to principal. Interest still applies to what is left.
Educational information only. JagInsights is not a financial adviser, broker, or lender. See the Terms and Privacy Policy.