Where the minimum payment number comes from
Your minimum due is the output of a formula printed in your cardholder agreement. Two shapes cover almost every US consumer card.
Percentage of the balance, or a dollar floor. The issuer takes a small percentage — commonly 1% to 3% — of the balance including that cycle's interest and fees, and demands the greater of that and a flat floor of $25 to $40. This is the traditional formula and the one that produces the longest payoff schedules.
Interest and fees plus a slice of principal. The issuer charges everything that accrued in the cycle plus a fixed percentage of the principal, again subject to a floor. This shape guarantees the balance falls every month, because the interest is always covered before any principal percentage is added.
The difference between them matters enormously, and the reference table below shows why. On a $5,000 balance, the interest-plus formula produces a minimum that rises with the APR — $100 at 12%, $175 at 30% — because it always pays the interest first. The 2% formula barely moves: $101 at 12%, $102.50 at 30%. At 30% the 2% minimum does not even cover the $125 of interest, so a cardholder paying it faithfully watches the balance grow.
That threshold has a clean form. A percentage minimum of p covers the monthly interest exactly when p × B ≥ B × APR/12, which reduces to APR ≤ 12p. A 2% minimum covers interest up to a 24% APR and no further. A 3% minimum covers up to 36%. This is not an obscure edge case — it is the ordinary condition of a high-rate card on a low-percentage formula.
Why the schedule has no formula
An instalment loan has a closed-form payoff period because the payment is constant. A minimum-payment schedule does not, because the payment is a function of the balance and the balance is a function of the payment. Each month:
Iₖ = Bₖ × APR/12, Dₖ = max(F, p(Bₖ + Iₖ) + f), B(k+1) = Bₖ + Iₖ − Dₖ
The only way to know the payoff date is to run it. That is what the calculator does, month by month, until the balance clears or a century passes.
The schedule has three distinct phases, and recognising them explains the shape of the year-by-year table.
Phase one: the percentage rules. Early on, the percentage of a large balance exceeds the floor, so the required payment is large — and falls every month as the balance falls. This is the phase people describe as feeling like running to stand still. The proportion of each payment that reaches principal is fixed, so progress is geometric and slow.
Phase two: the floor takes over. Once the balance drops far enough that p × B is below the dollar floor, the payment stops declining. From that point the schedule is an ordinary fixed-payment amortisation and the balance falls linearly rather than geometrically.
Phase three: the final months. The last payment is trimmed to whatever remains.
The dollar floor is what makes the whole thing terminate. Without it, a pure percentage schedule approaches zero asymptotically and never quite arrives. Issuers include a floor for their own operational reasons, but its side effect is that it is the only thing guaranteeing the debt ever ends.
Worked example: $5,000 at 24.99% on a 2% minimum
You owe $5,000 at 24.99% APR. The agreement demands 2% of the balance including interest, with a $35 floor, and you add no new charges.
- Month one interest. $5,000 × 24.99% ÷ 12 = $104.13.
- Month one minimum. 2% × ($5,000 + $104.13) = 2% × $5,104.13 = $102.08. That is above the $35 floor, so the percentage rules.
- Principal repaid in month one. $102.08 − $104.13 = −$2.05. The payment does not cover the interest, so the balance rises to $5,002.05.
That single line is the whole story of this card. The APR of 24.99% is above 12 × 2% = 24%, so the 2% formula cannot cover the interest and the balance grows for as long as the percentage rules. It only starts falling once the dollar floor takes over — and the floor never takes over here, because the balance is rising away from it rather than shrinking toward it.
Change one number and the picture inverts. At a 20% APR the month-one interest is $83.33 and the minimum is 2% × $5,083.33 = $101.67, leaving $18.34 for principal. The balance now falls, slowly, and the schedule terminates. Change the formula instead to interest-plus-1%-of-principal at the original 24.99%: the minimum becomes $104.13 + $50.00 = $154.13, and $50 goes to principal in month one.
Against any of these, a level payment is transformative. Paying a fixed $200 a month on the $5,000 at 24.99% covers the interest with $95.87 to spare in month one, and the amount reaching principal grows every month as the interest shrinks — the exact opposite of the minimum schedule, where the amount reaching principal shrinks as the payment shrinks.
Reading the result
Check the first line first: does the minimum cover the interest? The calculator splits it for you. If the interest portion is the whole payment, nothing else in the projection matters — you are not repaying a debt, you are renting it, and the balance is going the wrong way. Getting above that threshold is the only meaningful first goal.
Compare total paid against the original balance. A minimum schedule frequently returns more than double the balance over its life. That ratio, rather than the number of years, is the figure that makes the cost concrete.
Treat the fixed payment column as the actual plan. Almost any level payment above the current minimum beats the declining schedule, and the improvement is nonlinear: a payment 50% above the minimum typically cuts the payoff period by far more than a third, because every dollar above the interest compounds into faster principal reduction.
Freeze the card while you do it. The new-charges input exists to show what continuing to spend does. If new charges roughly equal the principal portion of your payments, the balance is permanent regardless of how diligently you pay.
Your statement carries a required disclosure that says much the same thing. Since the Credit CARD Act of 2009, issuers must print how long it will take to repay the balance making only minimum payments, and what payment would clear it in three years. If your statement's figure and this calculator disagree, the likely reasons are a different formula, a promotional balance at a separate rate, or the statement's assumption that no new charges are made.
First month's minimum on a $5,000 balance
| APR | Monthly interest | 2% formula | Interest + 1% formula | Principal repaid under the 2% formula |
|---|---|---|---|---|
| 12% | $50.00 | $101.00 | $100.00 | $51.00 |
| 18% | $75.00 | $101.50 | $125.00 | $26.50 |
| 24% | $100.00 | $102.00 | $150.00 | $2.00 |
| 30% | $125.00 | $102.50 | $175.00 | −$22.50 |
The last column crosses zero between 24% and 30%, exactly where APR = 12 × 2% = 24%. Above that rate a 2% minimum leaves the balance growing, while the interest-plus formula always reduces it.
What the projection assumes
- Interest is computed monthly as balance × APR ÷ 12, rather than by the daily average-balance method issuers actually bill. Over a multi-year projection the difference is small; for a single statement, use the average daily balance approach instead.
- One APR applies to the whole balance. Promotional balances, balance transfers and cash advances carry their own rates and their own minimums, and payments above the minimum must be applied to the highest-rate balance first.
- No late fees or over-limit charges. A single missed payment can trigger a fee and a penalty APR, both of which lengthen the schedule considerably.
- The formula does not change. Issuers may amend the minimum payment formula on notice, and many raised their percentages after the CARD Act.
- New charges post at the start of the month. Real charges post throughout the cycle and accrue interest from their own posting dates.
- The dollar floor is fixed. Some agreements set the floor as the greater of a dollar amount and the interest plus fees, which behaves differently once the balance is small.
What to do instead of paying the minimum
Pay a fixed amount, not a percentage. This is the single highest-value change available, and it costs nothing to arrange. Fix the payment at the current minimum and never lower it: because the minimum declines as the balance falls, holding the payment level automatically accelerates the schedule every month. The credit card payoff calculator converts any level payment into a payoff date.
Attack the highest rate first when you have several cards. The debt avalanche calculator orders balances by rate and minimises total interest; the debt snowball calculator orders them by size for the behavioural benefit of clearing accounts. Whichever you choose, pay the minimum on everything else so no account goes delinquent.
Move the balance if the arithmetic supports it. A balance transfer or a fixed-rate instalment loan converts a declining-minimum revolving debt into a level-payment schedule with a definite end date. The debt consolidation loan calculator compares the two including the origination fee, which is usually the term that decides it.
Understand the billing before you optimise it. The credit card interest charge calculator shows how a single cycle is billed under the average daily balance method, which is what determines whether paying mid-month is worth doing.
Watch what this does to your credit file. A high balance relative to the limit is one of the largest inputs to a credit score, and it is fixed by paying the balance down rather than by paying on time. The credit utilisation calculator tells you how far the balance has to fall to reach a given threshold.