1. What is the Minimum Payment Calculation?

The minimum payment calculation determines the smallest amount you must pay on your credit card balance each month to remain in good standing. It's typically the greater of a percentage of your balance or a fixed minimum amount.

2. How Does the Calculator Work?

The calculator uses the minimum payment formula:

Where:

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

Explanation: The calculation ensures you pay either the percentage of your balance or the fixed minimum, whichever is greater.

3. Importance of Minimum Payment Calculation

Details: Understanding your minimum payment helps with budgeting and shows how long it would take to pay off debt making only minimum payments (typically many years with substantial interest).

4. Using the Calculator

Tips: Enter your current balance, your card's minimum payment percentage (usually 1-3%), and the card's minimum fixed payment (often $25-$35). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Should I only pay the minimum?
A: No, paying only the minimum extends repayment time and increases interest costs significantly. Always pay more than minimum if possible.

Q2: How is the percentage rate determined?
A: The percentage is set by your credit card issuer, typically ranging from 1% to 3% of your balance.

Q3: Can the minimum payment change?
A: Yes, as your balance changes or if the card issuer adjusts terms (with notice).

Q4: What if my calculated minimum differs from my statement?
A: Some issuers include fees/interest in the minimum calculation. Check your card agreement for exact terms.

Q5: Does paying minimum affect my credit score?
A: Paying at least the minimum on time helps your score, but high utilization (balance vs limit) can hurt it.