Minimum Payment
The smallest amount required each month on a credit card to keep the account in good standing.
What is Minimum Payment?
The minimum payment is the lowest amount a credit card holder must pay each billing cycle to avoid late fees and a negative mark on their credit report. It is typically calculated as 1–3% of the outstanding balance, or a flat minimum (often $25), whichever is greater. Paying only the minimum while carrying a high balance results in most of the payment going toward interest rather than principal, dramatically extending the time to pay off debt and the total interest cost. Paying the full statement balance each month is always the optimal strategy when possible.
Example
A $3,000 balance at 22% APR with a $60 minimum payment takes over 10 years to repay and costs more than $4,100 in interest. Paying $200 per month instead clears it in under 18 months with roughly $700 in total interest.
Source: Consumer Financial Protection Bureau — Minimum Payments