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What are the minimum payments on a credit card?

When you take out a credit card, you’ll have minimum payment to make each month.

Find out how a credit card minimum payment is calculated, if you should pay more, and what happens if you pay less than the minimum.

When you take out a credit card, you’ll have minimum payment to make each month.

Find out how a credit card minimum payment is calculated, if you should pay more, and what happens if you pay less than the minimum.

Written by
Sajni Shah
Consumer money expert
Posted
2 NOVEMBER 2023
6 min read
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What is a credit card minimum payment?

When you take out a credit card, you’ll be expected to pay off at least some of your outstanding balance every month. The lowest amount you can pay is known as the ‘minimum payment’.

You can find the minimum payment amount on your monthly credit card statement, along with the full outstanding balance you owe. Bear in mind the following:

  • You’ll need to pay at least the minimum amount, or you could be charged a late payment fee and lose any promotional offers such as a 0% introductory deal.
  • The minimum payment amount can change each month depending on the statement balance.
  • If you can, it’s best to pay more than the minimum each month. This can help you pay off the balance sooner and prevent interest from building up.

How is the credit card minimum payment calculated?

Your credit card minimum payment is calculated based on your latest statement balance.

It will be calculated in one of two ways:

  • As a percentage of the amount owed – let’s say the outstanding balance on your card is £2,000 and your minimum payment is set at 2.5%. This means your minimum payment will be £50.
  • As a flat fee – say, £5 or £10.

You don’t get to choose which one to pay - that’s for the lender to decide. Generally, they’ll charge whichever is higher.

Top Tip

Always aim to pay more than the monthly minimum on a credit card:
Paying just the monthly minimum each month will take you much longer to pay off your credit card debt – sometimes it could be several years, depending on the amount you have to pay off. 

If you only pay the minimum amount over an 18-month period, your card provider may classify you as being in ‘persistent debt’. If this happens, they must contact you to discuss your options. They may even suspend your card, which could damage your credit score. 

The easiest way to deal with this is by increasing your monthly repayments. Even if you can’t manage the full balance, try to pay as much as you can afford. You’ll reduce the amount of interest you’ll pay, clear the debt faster, and improve your credit score.

Why should I pay more than the minimum payment on a credit card?

Only paying the minimum payment could mean you pay significantly more in total repayments over a longer period of time, if you have to pay interest. Paying more than the minimum could be a lot cheaper in the long run.

As a credit card holder, you’ll have three monthly options:

1. Pay the minimum amount

This will ensure you won’t be hit with extra charges or late payment fees. It can help if you’re on a tight budget but unless you’re on a 0% deal, you’ll be paying interest on the remaining balance. It will also take you longer to clear your credit card debt in full.

2. Pay off more of your balance

If you can budget to pay off a little extra each month, you’ll pay less interest overall, and clear the outstanding balance more quickly.

3. Pay off all of your balance

If you can clear your monthly debt in full each time, you’ll often have no interest to pay, particularly on credit card purchases. It’s the most cost-efficient way of using a credit card.

Just be aware that if you pay the minimum credit card payment on an interest-free deal, you’ll start paying interest once the 0% period ends.

Only making the minimum payment every month can cost you more in the long run.

How to make a minimum credit card payment

There are two ways to make a credit card payment:

Direct debit

The easiest way to make a credit card payment is by direct debit. It ensures you never forget a payment and risk late payment charges. 

You can set up a direct debit with your card provider to pay a certain amount each month. This can be just the minimum, a fixed percentage each month, an amount set by you, or the full balance. 

If you set the direct debit to pay less than the minimum payment, you card provider will take the minimum anyway.

Manual payments

When you get your monthly bill, you could choose to pay your credit card provider by bank transfer or your debit card.

Don’t forget to pay at least the minimum amount by the due date, or you could face high penalty charges.

What should I do if I can’t afford the minimum payment on a credit card?

If you can’t afford to make the minimum payment, let your credit card provider know as soon as possible.

They should help you come to an agreement to manage your debt and make your repayments. For example, they may reduce the interest or even pause your payments for an agreed period.

This invariably means it will take longer to pay off your debt and you’ll accrue more interest.

If you’re struggling with minimum repayments because of high interest charges, it might be worth considering moving the debt to a 0% balance transfer credit card. Some offer zero interest for up to two years. This would give you breathing space to pay off your credit card debt without the interest stacking up.

If you’re having money problems, it’s important to know that help is out there. You can get free and impartial debt management advice from organisations such as Citizens AdviceStepchange or the government’s Moneyhelper service.

Compare credit cards with Compare the Market

Managing your credit card payments well could help improve your credit score as it shows lenders you’re a responsible borrower. It could also help you qualify for better deals in the future.

If you’re confident you can regularly pay off a significant portion of your monthly debt, or the entire balance, use our credit card eligibility checker to help you choose the right card for you.

Find out which credit cards you’re likely to be approved for without it harming your credit score.

Compare the Market Limited acts as a credit broker, not a lender. To apply you must be a UK resident and aged 18 or over. Credit is subject to status and eligibility.

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Frequently asked questions

Can you pay less than the minimum payment on a credit card?

If you pay less than the minimum payment on your credit card, you’ll be considered behind with payments. You may be charged a late payment fee, which is typically £12.

Missing payments could also be marked on your credit report and damage your credit score. This may make it harder to borrow in future. If you miss too many payments, your lender may decide to cancel your card and demand full repayment of your outstanding balance. They could even take action against you which means your assets may be at risk if you end up in a court or bankruptcy process.

If you're worried you might miss a repayment, call your credit card provider to discuss your options. It's better to speak to them as soon as possible.

Does making the minimum payment affect my credit score?

Paying the minimum amount over the short term is unlikely to affect your credit score.

But if you consistently pay just the minimum, your card provider will consider you in ‘persistent debt’. This may damage your credit score.

If I pay the minimum credit card payment, do I get charged interest?

If you pay any less than the full balance each month, you’ll be charged interest on the rest, unless you have a 0% deal.

The minimum payment may be less than the added interest. So, if you’re only paying the minimum amount each month, you could be constantly battling to stay on top of mounting debt.

How can I make sure I meet my credit card payments?

Setting up a direct debit will ensure you meet your credit card payments each month.

You can set this to take at least the minimum amount due, but if you can, it’s better to set it to a higher amount. That way, you’ll pay less interest, clear your credit card debt more quickly, and won’t risk falling into persistent debt.

Sajni Shah - Consumer expert on utilities and money

Sajni is passionate about building products, allowing Compare the Market to help you make great financial decisions. She keeps track of the latest trends and evolving markets to find new ways to help you save money.

Learn more about Sajni

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