How a Minimum Payment is Calculated by Card Issuers

Updated: 01/10/18

If you are 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 be aware 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.)

Check out this list:

Bank How The Minimum Payment Is Calculated
American Express The greater of these:

$35 or 1% of the balance plus monthly interest and fees*

Bank Of America The greater of these:

$25 or 1% percent of the full balance plus the monthly interest and fees

Barclay Bank The greater of these:

$27 or 1% percent of the full balance plus the monthly interest and fees

Capital One The greater of these:

$25 or 1% percent of the full balance plus the monthly interest and fees

Chase The greater of these:

$25 or 1% percent of the full balance plus the monthly interest and fees

Citi The greater of these:

$25 or 1% percent 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% percent of the full balance or $20 plus the monthly interest and fees.

Santander The greater of these:

$25 or 1% percent 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% percent of the full balance plus the monthly interest and fees

*Amex will also add 1/24 of your over the limit amount.

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

Discover will charge you $35 or 2% percent 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 a monthly interest of, let’s say 24%, then your minimum payment will be $220 (the monthly interest is $200 plus $20). But if your Apr. is 12% percent the minimum payment will be $200 (two percent of your balance). Complicated? I know. Let me try, though, to make it simpler. Remember this:  if you have a high Apr., then Discover’s minimum payment will be less than with most other banks. If you have a low Apr., then your minimum payment will be more with Discover than with most other banks.

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 you to pay off your balance. But you don’t want to make it hard on yourself. Since 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.

Next week we will post more on balance transfers and how to save money on interest payments, so stay tuned!

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