Minimum Payments
When calculating the minimum payment on a credit card, there are many factors that come into play. This includes the balance on the card, the annual percentage rate (or APR), and any monthly or transaction fees. The latter may include insurance on the card, fees for balance transfers or cash advances, or monthly membership fees. You will need to look at your most recent statement to find this information, which can and will likely change over the life of the card. Included in the fine print of your statement should be the formula used to compute minimum monthly payments. You can call your credit card company to ask if you are not sure.
Percentage of Total Balance
Some credit cards will charge you a straight-up percentage on the balance that you owe. Often that will fall between 1 percent and 4 percent.
For example, if you have a $3,000 balance on your card and you pay 2 percent of your balance every month, then you will be charged $60 as your minimum payment for that month.
Office of the Comptroller's Formula
The Office of the Comptroller, under the U.S. Department of Treasury, issued a formula for calculating the minimum monthly payment. This formula is as follows: (account balance x APR) + (account balance x 1 percent) + (transaction fees) = (minimum monthly payment).
For example, let's say you have a balance of $1,500 with 18 percent APR and $25 in transaction fees. The equation would be 270 + 15 + 25 = $310 due that month.
Variations
Most major companies, such as Wells Fargo, Citibank and Bank of America, have adopted the formula provided by the Office of the Comptroller. Other companies, such as J.P. Morgan Chase, will charge either the standard formula or 2 percent of the balance, whichever is greater. If your entire balance is very low, like between $15 and $20, you will be given the entire balance as the minimum payment. Looking at your most recent statement or calling your credit card company will tell you how your payment is calculated.
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