1. What is 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. Credit card companies typically calculate this as either a percentage of your balance or a fixed minimum amount, whichever is higher.

2. How Does the Calculator Work?

The calculator uses the minimum payment formula:

Where:

• \( P \) — Principal balance (current amount owed)
• \( X\% \) — Percentage rate (typically 1-3% of balance)
• \( C \) — Minimum constant amount (e.g., $25)
• \( MP \) — Minimum payment due

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

3. Importance of Minimum Payment

Details: Paying only the minimum keeps your account current but results in paying more interest over time. Understanding your minimum payment helps with budgeting and debt repayment planning.

4. Using the Calculator

Tips: Enter your current balance, the percentage rate your card uses (usually 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 allow cardholders to maintain their accounts while paying down balances over time, though paying only the minimum increases total interest paid.

Q2: What's a typical percentage for minimum payments?
A: Most cards use 1-3% of the outstanding balance, often with a minimum fixed amount (e.g., $25 or ₹500).

Q3: Is paying only the minimum payment advisable?
A: While it keeps your account in good standing, paying only the minimum results in higher interest costs and longer repayment periods.

Q4: How can I reduce my minimum payment?
A: Paying down your principal balance will reduce the percentage-based portion of your minimum payment.

Q5: Do all credit cards use this formula?
A: Most use similar formulas, but some may have variations like flat fees plus interest or different percentage tiers.