How Credit Card Minimum Payments Are Calculated

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If you’re applying for a new credit card or if you’re planning to make a balance transfer from one credit card to another, it is of utmost importance to know how the minimum payment is calculated by the new card issuer. Not every bank has the same method as to how they calculate a minimum payment, so beware of that when transferring your balance from one card to another. Your minimum payment may go up, and you will want to make sure that you can afford the new minimum monthly payment. (If the new card has a lower or 0% APR offer, then in most cases, your minimum payment will go down because your monthly interest will be less.)

How are minimum payments calculated by each credit card issuer?

Sample Caption
Bank	Minimum Payment Calculation
American Express Personal	The greater of these: $40, 2% of the balance excluding interest and fees, 1% of your balance plus interest and fees
American Express Business	The greater of these: $35, For a balance of $0-$25,000: 1% of the balance plus monthly interest and fees, For a balance of $25,000-$75,000: 5% of the balance plus monthly interest and fees, For a balance over $75,000: 10% of the balance plus monthly interest and fees*
Bank Of America	The greater of these: $25, or 1% of the full balance plus the monthly interest and fees
Barclay Bank	The greater of these: $27, or 1% of the full balance plus the monthly interest and fees
Capital One	The greater of these: $25, or 1% of the full balance plus the monthly interest and fees
Chase	The greater of these: $25, or 1% of the full balance plus the monthly interest and fees
Citi	The greater of these: $25 or 1% of the full balance plus the monthly interest and fees, or 1.5% of the full balance
Discover	The greater of these: $35, or 2% of the full balance or $20 plus the monthly interest and fees
Santander	The greater of these: $25, or 1% of the full balance plus the monthly interest and fees
Synchrony	The greater of these: $25, or $35 if you had any late payments within the last six months, or 1% of your full balance plus the monthly interest and fees
Us Bank	The greater of these: $30, or 1% of your full balance plus the monthly interest and fees
Wells Fargo	The greater of these: $15, or 1% of the full balance plus the monthly interest and fees

Amex will also add 1/24th of charges above the credit limit for personal cards and all charges above the credit limit for business credit cards.

Key Takeaways

As you can see, most banks adopted the same calculation method, which is: the greater of these two: $25 or 1% of the full balance plus the monthly interest and fees.

American Express

American Express has a different minimum payment for personal credit cards and business credit cards (Amex always likes to complicate matters), as noted above. The minimum payment for personal cards will always be the greater of $40 or 2% of the entire balance excluding interest and fees or 1% of the balance plus interest and fees. In other words, if you carry a balance and pay interest, expect your minimum payment to be 1% of your balance plus interest and fees. If you don’t carry balances and don’t pay interest, your minimum payment will be 2% of your balance.

The minimum payment for business cards is split into three tiers:

Any balance below $25,000 will have a minimum payment of $35 or 1% of the balance plus monthly interest and fees.
The portion of the balance of $25,000 - $75,000 will have a minimum payment of 5% of the balance plus monthly interest and fees.
The portion of the balance that exceeds $75,000 will have a minimum payment of 10% of the balance plus monthly interest and fees.

Also, keep in mind that with American Express, any amount you swipe above your credit limit will be due in full.

Discover

Discover will charge you $35 or 2% of your full balance without adding the monthly interest, or $20 plus the monthly interest. So basically, if you have a $10,000 balance with a 0% APR promotion, your minimum payment will be $200 (2% of 10,000). But if you pay monthly interest at, let’s say, 24%, then your minimum payment will be $220 (the monthly interest is $200 plus $20). But if your APR is 12%, the minimum payment will be $200 (2% of your balance).

Complicated? I know. Let me try, though, to make it simpler. Remember this: if you have a high APR on your Discover card, then Discover’s minimum payment will be less than with most other banks. If you have a 0% APR offer on your Discover card, then your minimum payment will be 2% of your balance, which is way higher than with most banks.

Citi

Citi will charge you $25 or 1% of your balance, plus the monthly interest and fees, or 1.5% of your full balance. What this basically means is that in normal cases, your minimum payment will be 1% plus the monthly interest and fees. But if you have a promotion 0% APR offer, then your minimum payment will be 1.5% of your total balance.

To make it simpler, remember this: If you have a 0% APR offer with Citi, then your minimum payment will end up being 1.5%, which is more than most banks. If not, then your minimum payment will be the same as with most banks.

What is Better: A Higher or Lower Minimum Payment?

The higher your minimum payment is, obviously, the faster it will take for you to pay off your balance. But you don’t want to make it hard on yourself. With a lower minimum payment, you have the option, on a rainy day, to pay less and still not be smacked with a late fee and/or receive a late mark on your credit report.

Definitely, make it a priority to get your credit card debt down the quickest way possible by trying to pay off the biggest portion of your balance affordable to you each month. Don’t just pay the minimum payment, regardless of what the minimum payment is.