What Is a Minimum Payment?

Posted by Frank Gogol
Updated on July 25, 2022

At the end of 2020, there were 365 million credit card accounts in the United States. Most people have a credit card nowadays, and this gives them a huge responsibility because they must make regular payments back. But what happens when you cannot pay the whole amount one time?

Here is where minimum payments come into play. However, not everyone knows how a minimum payment works and whether it will affect their credit score or not. So, what is a minimum payment? Read this article to find out.

What Are Credit Card Payments?

A credit card can be used to pay for certain services or goods. It is like a small loan that a bank offers you. When you spend money from your credit card, you are expected to pay it back before a set date, or in regular installments.

For many, credit cards are a solution to their problems. When they’re out of money and need to purchase food or other necessary products, a credit card will come in handy. Simultaneously, these cards are useful to those who want to improve their credit score.

Once you use a credit card to make a payment, you will start receiving monthly credit card bills. Generally, you’re advised to pay the whole amount from the bill. At the same time, some people cannot pay the money in full for that specific month. Minimum payments can be done in these situations.

To make sure you do not miss any payment by mistake, you can set up automatic monthly payments. This way, the amount owed every month will be taken from your balance automatically, so you do not have to worry about it yourself.

After making a payment, your credit agencies will hear from your credit card issuer about it.

What Is a Minimum Payment?

A minimum payment refers to the lowest amount you owe to your credit card issuer by a certain date with no penalties.

When you get your monthly bill, you will be communicated the amount you should pay that month. If you are dealing with difficulties and you are not able to pay the entire installment, you can make a minimum payment. This small amount can be 1-3% of the outstanding balance, as well as any potential fees and interest from the last month.

It’s always better to pay the full amount on the credit card bill – otherwise, interest charges will keep gathering, making it harder to pay the loan in the long run. While it’s not a problem if you only make the minimum payment one or two times, doing this every month means it will take you longer to finish paying off your debt. It might also incur hundreds or thousands of dollars in extra costs.

How Do Minimum Payments Work?

If you have credit card debt, you must know how to pay a credit card bill – and that involves knowing how minimum payments work.

As mentioned earlier, a minimum payment is the lowest amount of money you can pay off monthly without incurring fees and interest. Usually, the minimum payment amount will be calculated either as a set amount in dollars or as a specific percentage of your balance.

Most times, it will be between 1% and 3% of your card’s outstanding balance. Fees and interest will also be included in this small amount. You should also keep in mind that you must pay your full balance if the whole balance amount is lower than the minimum due.

Although the minimum payment amounts are similar among various credit card issuers, each one has its own policy. Therefore, the minimum payment for each issuer will be different from one credit card firm to another.

Here are some examples of large credit card issuers and their minimum payments:

  • Wells Fargo Platinum Visa – You must pay 1% of the statement balance or $25, the annual interest and fee, as well as any amount that is past due.
  • Capital One Platinum Credit Card – 1% of the balance or $25 must be paid, as well as any late fees and new interest, depending on which amount is larger.
  • Bank of America Customized Cash Rewards credit card – 1% or $25 of the balance must be paid, as well as any late fees or new interest, depending on which one is larger.

Pros and Cons of Making a Minimum Payment

Minimum payments are useful when an individual is unable to pay the entire bill that month. Others prefer to pay everything they owe that month, aiming to repay the whole loan as quickly as possible.

Making minimum payments comes with pros and cons, and if you own a credit card, you should know what these are. Let’s take a look at the benefits and drawbacks of minimum payments:


  • By making a minimum payment, you will be able to avoid penalty APRs and late fees.
  • You can still build your credit history by making minimum payments by the set date.
  • It can be very useful for cases when you don’t have enough money to pay the full amount on the credit card bill.
  • It works nicely when you also have to repay other debts.
  • Minimum payments will give you the opportunity to repay a larger amount of money over time.


  • Making minimum payments means that it will take longer to repay the whole amount of money you owe to the credit card issuer.
  • You’ll get a false sense of the things you can afford.
  • Minimum payments could harm your credit score if you have a high credit utilization rate.
  • With minimum payments only, you will have to pay more in interest.

What Happens If You Pay Less than the Minimum Amount You Owe?

Paying less than the minimum amount due will affect not only your debt but also your credit score. Basically, being 30 days behind with your minimum payment will bring down your credit score. It may even lead to your bank freezing the credit card if you’re behind by too much.

On top of that, you may incur late payment fees and will not be able to pay the credit card interest cost. You’ll have extra charges to deal with, and it will also take longer to repay the whole loan.

Minimum Payments FAQ

Here are some questions you may still have about minimum payments:

What Happens When You Only Make Minimum Payments?

Making only minimum payments will make you deal with your debt for an extended period – this means you will not finish paying off the loan sooner. At the same time, you will pay more in interest.

How Does Only Making Minimum Payments Affect Your Credit?

Only making minimum payments can affect your credit – especially if you have a high credit utilization ratio. Making minimum payments also means that the high balance is here to stay for a longer time.

What to Do If You Can Only Afford to Make Minimum Payment?

You should make at least the minimum monthly payment if you cannot pay the whole amount on your bill. It will help you stay away from penalties and fees, and will ensure your credit score doesn’t decrease. It’s still recommended to pay the full amount when possible, though.

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Final Thoughts

If you want to get the best minimum payment amounts, you should know how to choose a credit card issuer. Bear in mind that it’s best to pay what you owe in full, but when your finances make it hard for you to do this one month, you can settle for the minimum payment.

Need a Loan? Get One in 3 Simple Steps

If you are considering applying for a personal loan, just follow these 3 simple steps.


Apply online for the loan amount you need. Submit the required documentation and provide your best possible application. Stronger applications get better loan offers.


If your application meets the eligibility criteria, the lender will contact you with regard to your application. Provide any additional information if required. Soon you’ll have your loan offer. Some lenders send a promissory note with your loan offer. Sign and return that note if you wish to accept the loan offer.


The loan then gets disbursed into your U.S. bank account within a reasonable number of days (some lenders will be as quick as 2-3 business days). Now you need to set up your repayment method. You can choose an autopay method online to help you pay on time every month.


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