1. What is the Minimum Payment Calculation?

The minimum payment is the lowest amount you must pay on your credit card balance each month 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 ($)
• \( P \) — Principal balance ($)
• \( X\% \) — Percentage rate (e.g., 2%)
• \( C \) — Minimum constant ($, e.g., $25)

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 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 progress toward paying your debt while giving flexibility in managing cash flow.

Q2: Is it bad to only pay the minimum?
A: While it keeps your account in good standing, it leads to higher interest costs and longer repayment periods. Always pay more than the minimum if possible.

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

Q4: Can the minimum payment change?
A: Yes, it changes as your balance changes. Some issuers may also adjust their minimum payment policies.

Q5: What happens if I pay less than the minimum?
A: You may face late fees, penalty APRs, and negative marks on your credit report.