1. What is the Minimum Payment Calculation?

The minimum payment is the lowest amount you can pay on your credit card balance to keep your account in good standing. It's typically calculated as a percentage of your balance or a fixed minimum amount, whichever is greater.

2. How Does the Calculator Work?

The calculator uses the minimum payment formula:

Where:

• \( MP \) — Minimum payment (currency)
• \( P \) — Principal balance (currency)
• \( X\% \) — Percentage rate (e.g., 2%)
• \( C \) — Minimum constant (e.g., $25 or ₹500)

Explanation: The calculation takes the greater value between the percentage of your balance or the fixed minimum amount set by your credit card issuer.

3. Importance of Minimum Payment Calculation

Details: Understanding your minimum payment helps with budgeting and financial planning. However, paying only the minimum will result in paying more interest over time and taking longer to pay off your balance.

4. Using the Calculator

Tips: Enter your current credit card balance, the percentage rate your issuer uses (typically 1-3%), and the fixed minimum amount (often $25-$35). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why do credit cards have minimum payments?
A: Minimum payments ensure you're making some payment toward your debt each month while maintaining account flexibility.

Q2: Is paying only the minimum payment bad?
A: While it keeps your account in good standing, it leads to higher interest costs and longer repayment periods.

Q3: How is the percentage rate determined?
A: The rate is set by your credit card issuer, typically ranging from 1% to 3% of your balance.

Q4: Can the minimum payment change?
A: Yes, it changes with your balance and if the issuer adjusts their terms (with proper notice).

Q5: Should I pay more than the minimum?
A: Yes, paying more than the minimum reduces interest costs and helps pay off debt faster.