On every credit card statement, you will see a minimum payment. While this may not seem like much compared to your overall debt, this amount could be encouraging you to spread your repayments over a longer period and costing you more interest in the long run.
What is a minimum payment and how is it calculated?
A credit card minimum payment is exactly what it sounds like – a minimum payment you must make on your credit card bill by a certain date.
Your bank or provider will work out this payment sum based on your overall account debt and your card’s interest rate.
At the end of each billing cycle, your bank or provider will send you a bill featuring all your recent transactions. Your statement will include the total amount you owe on your credit card, total transactions made during the billing cycle and your minimum payment for that billing cycle.
Banks and credit card providers set different monthly minimum repayments, which can usually be found in your “summary box”. Under UK rules, any credit cards taken out since April 2011 must set a monthly minimum payment of at least 1% of your balance. The table below serves as an example of how a card provider calculates its minimum payment.
How can I pay the minimum payment?
You usually have 2 options to pay off your credit card bill every billing cycle.
Direct debit. You can set up a direct debit with your bank where you can specify that you’d like to automatically pay the full balance, a fixed amount or just the minimum payment every month. By setting up a direct debit, you’ll guarantee you will never miss a payment and won’t have to worry about penalty fees or damage to your credit record.
Manual payments. You can decide how much you want to pay every month – whether it’s the minimum payment, the full balance or somewhere in between. You can pay your credit card company via standing order or bank transfer. This method gives you greater control over how much you are paying, but you’re more at risk of missing payments so you need to make sure you can keep track of the payment deadline.
Should I pay the minimum payment or a larger amount?
It all depends on what you can afford. At the very least, you should make the minimum payment. However, by continuing to pay only the minimum payment, you will take longer to pay off your debt and are likely to incur higher interest fees.
To avoid paying unnecessary interest, it’s a good idea to pay your entire balance or something in between the minimum payment and your total debt.
As your outstanding debt reduces with every payment, so does the minimum payment required on every new statement. This means small balances on credit cards could take a long time to repay if you continued to make the minimum payments.
Example: Tom has a £4,000 credit card debt
Admin assistant Tom has run up a £4,000 credit card debt but can only afford the monthly minimum payments of £65.
If Tom continues to pay off his debt at 18.9% APR with the £65 monthly payments, it could take him 13 years to pay it off. Aside from paying back his debt amount of £4,000, he would end up spending a further £6,121 on interest.
A friend suggested he consider a balance transfer card, giving him a promotional 0% interest rate for 24 months, with a one-off fee of 1.4%. Under this offer, Tom could continue to make the monthly minimum payments of £65, but the interest break means he could pay a lot less overall and pay off his debt faster. The balance transfer offer means he could pay off his debt in 6 years and 7 months and only end up spending a further £1,169 on fees and interest. By transferring his debt to a 0% balance transfer offer, Tom would save £4,952.
Some credit cards offer 0% interest on purchases and/or balance transfers for an introductory period, which usually ranges from 12-36 months. Although it means you get a break from interest, it does not mean you get a break from making monthly minimum payments.
It’s important to note that making your minimum monthly payment won’t necessarily clear your total debt within your interest-free period.
Instead, you should calculate exactly how much you need to pay each month to repay the entire balance by the time the interest-free period ends. Find your monthly repayment by dividing the size of your debt by the number of months in the balance transfer offer.
The table below shows what percentage you should pay off each month to fully clear your debt during the interest-free balance transfer promotional period. We’ve also shown how much this would be for a £2,000 debt. For this example, we’re assuming no new purchases are being made with the card.
Duration
% of total to repay each month to clear debt
What that would equal per month on a £2,000 debt
6 months
16.67%
£333.33
9 months
11.11%
£222.22
12 months
8.33%
£166.66
14 months
7.14%
£142.85
16 months
6.25%
£125.00
18 months
5.56%
£111.11
20 months
5.00%
£100.00
24 months
4.17%
£83.33
If you miss a payment, you could incur penalty fees and could also have the 0% offer withdrawn or the time reduced.
What happens if I miss a minimum payment?
If you forget to pay or can’t afford to pay your minimum payment, you will incur fees and this could impact your credit report. This, in turn, could affect your ability to attain credit in the future.
If you accidentally missed the payment date, make a payment immediately. However, if you’re struggling to pay, contact your provider as soon as possible as it may be able to help.
You could also risk having your interest rate increased or perhaps the introductory 0% period on your card shortened or withdrawn altogether.
Yes. Most providers charge a late fee – usually between £9 and £12 – if you forget a payment. This late payment is also likely to impact your credit score. You should be able to find your provider’s fees in the summary box.
Always pay as much as you can towards the credit card debt that charges the highest rate of interest. For the card that charges the lower interest, make sure to make the minimum payments.
Alternatively, you could consider transferring both balances to a new card with an introductory 0% interest offer.
Finder survey: Do you understand all the features that credit cards can have?
Response
Yes
58.53%
No
41.47%
Source: Finder survey by Censuswide of Brits, December 2023
We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you. Most of the data in Finder's comparison tables has the source: Moneyfacts Group PLC. In other cases, Finder has sourced data directly from providers.
Was this content helpful to you?
Thank you for your feedback!
To make sure you get accurate and helpful information, this guide has been edited by David Gregory as part of our fact-checking process.
Chris Lilly is Head of publishing at finder.com. He's a specialist in personal finance, from day-to-day banking to investing to borrowing, and is passionate about helping UK consumers make informed decisions about their money. In his spare time Chris likes forcing his kids to exercise more. See full bio
Chris's expertise
Chris has written 601 Finder guides across topics including:
Use our calculator to find out how long it would take to clear your credit card balance by making the minimum required payments vs paying a fixed amount each month.
The Yonder credit card has launched in the UK, using open banking to create a personalised picture of your spending habits to help you get the most out of your credit card.
Get all the details on how we rate the credit cards we review. We look at costs, fees, features and how well a card performs compared to the rest of the market.
Buy now and pay interest later with a 0% purchase credit card. Compare current offers with 0% p.a. on purchases.
How likely would you be to recommend Finder to a friend or colleague?
0
1
2
3
4
5
6
7
8
9
10
Very UnlikelyExtremely Likely
Required
Thank you for your feedback.
Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.
Advertiser disclosure
Finder.com is an independent comparison platform and information service that aims to provide you with the tools you need to make better decisions. While we are independent, the offers that appear on this site are from companies from which Finder receives compensation. We may receive compensation from our partners for placement of their products or services. We may also receive compensation if you click on certain links posted on our site. While compensation arrangements may affect the order, position or placement of product information, it doesn't influence our assessment of those products. Please don't interpret the order in which products appear on our Site as any endorsement or recommendation from us. Finder compares a wide range of products, providers and services but we don't provide information on all available products, providers or services. Please appreciate that there may be other options available to you than the products, providers or services covered by our service.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
