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

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, but paying only the minimum leads to higher interest costs and longer repayment periods.

4. Using the Calculator

Tips: Enter your current balance, the card's minimum payment percentage (typically 1-3%), and the card's fixed minimum payment (if any). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why do credit cards have minimum payments?
A: Minimum payments ensure lenders receive regular payments while giving borrowers flexibility, though it increases total interest paid.

Q2: Is paying only the minimum payment bad?
A: While it keeps your account in good standing, it maximizes interest costs and extends repayment time significantly.

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: What if my calculated minimum is less than the fixed minimum?
A: You'll pay the fixed minimum amount instead, as the formula takes the higher of the two values.

Q5: Can minimum payment requirements change?
A: Yes, issuers may adjust terms, including the percentage rate or fixed minimum, with proper notice.