Your minimum is usually based on a percentage of your balance — a small percentage. If you want to get out of debt, pay more than the minimum.
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You can’t win when you’re trying to figure out your minimum payment because your credit card balance is always going up and down. “How much is it going to be this month?”
In general, the way your card issuer calculates your minimum payment depends on how much you owe. Most of the time, the minimum payment is either a small amount of your balance or a set amount of money, whichever is greater. As a rule of thumb:
If your minimum payments seem impossibly unpredictable, you’re probably paying the first type of minimum payment — the calculated amount. Understanding the math behind that number can make it easier to predict next month’s bill.
A credit card with a $10,000 limit can be helpful for making big purchases or paying off debt. But if you only make the minimum payment every month, having a high balance can cost you a lot of money. What is the lowest amount that can be paid off on a $10,000 credit card balance? Let’s find out.
How Credit Card Minimum Payments Are Calculated
The minimum payment is the smallest amount you must pay on your credit card bill each month to keep your account in good standing. The minimum payment is typically calculated as a percentage of your statement balance plus any interest charges and fees.
Most credit card issuers require a minimum payment between 1% to 3% of your statement balance. However, there is usually a flat minimum dollar amount as well, which ranges from $15 to $35. Whichever amount is higher becomes your minimum payment for the month.
For instance, if your card has a $1,000 balance and a $300 minimum payment is needed, that $300 would be that payment. But if the flat minimum is $25, you’d have to pay $300 because it’s more than $25.
Along with the percentage or flat minimum amount, some issuers may also want you to pay interest and fees.
Minimum Payment on a $10,000 Balance
Based on typical minimum payment formulas, here are some examples of what the minimum payment would be on a $10,000 credit card balance:
- 1% of balance: $100
- 2% of balance: $200
- 3% of balance: $300
- Flat minimum of $25: $300 (since 3% of $10,000 is higher)
So on a $10,000 balance, you can expect to pay somewhere between $100 and $300 each month, depending on your card’s specific terms. Of course, this only covers the minimum payment. You can always pay more than the minimum if you want to pay off your balance faster.
The Problems With Only Paying the Minimum
While making the minimum payment keeps your account in good standing, it has some big downsides:
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You’ll be in debt for years – When you only pay the minimum, it can take a very long time to fully pay off your balance due to how much goes toward interest versus the principal amount you owe.
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Interest charges accumulate – The majority of your minimum payment goes toward interest fees rather than reducing your principal balance. This means you continue accruing high interest charges each month.
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Your balance won’t go down much – When your payment barely covers the interest fees, your actual balance decreases very slowly over time.
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You’ll pay more interest overall – Making minimum payments drags out the repayment period, leading you to pay far more interest costs in the long run.
To demonstrate, let’s look at an example $10,000 balance on a credit card with a 22% interest rate and 3% minimum payment:
- Minimum payment: $300
- Interest per month: $183 (22% APR / 12 months)
- Amount to principal: $117 ($300 – $183 interest)
It would take over 19 years and $18,159 in interest to pay off the $10,000 debt at this rate!
The Impact on Your Credit Score
Carrying a high credit card balance and making minimum payments can also hurt your credit utilization rate, which is the ratio of your balances versus your total available credit.
Ideally, you want to keep your utilization below 30%. But when your balance is maxed out or close to the credit limit, your utilization shoots up and drags down your credit score.
For instance, a $10,000 balance on a $10,000 limit card results in 100% utilization. That signals high risk to lenders and can cause a significant score drop.
How to Avoid Issues With High Balances
Here are some tips to manage a high balance responsibly:
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Pay more than the minimum – Increasing your payment by even $20 or $30 above the minimum will help pay off the debt much faster.
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Pay off in full each month – Always try to pay your statement balance in full and on time to avoid interest charges.
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Consider a balance transfer – Transferring your balance to a card with a 0% intro APR for balance transfers can pause interest for over a year.
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Consolidate with a personal loan – If you have good credit, you may qualify for a personal loan at a lower rate than your cards.
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Ask for a lower APR – You can call your credit card company and request a lower ongoing APR if you’ve been a long-time customer with positive payment history.
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Seek credit counseling – Nonprofit credit counseling agencies can help analyze your budget, negotiate with creditors, and set up affordable debt repayment plans.
The Bottom Line
The minimum payment on a $10,000 credit card balance typically ranges from 1% to 3% of the balance. While making the minimum keeps your account in good standing, it results in years of expensive interest charges and prevents you from making headway on reducing the principal amount owed.
Whenever possible, avoid just making minimum payments. Instead, pay off your full balance each billing cycle or pay above the minimum to knock out your debt faster and save money on interest fees. Carefully managing large credit card balances is key to avoiding long-term credit damage.
Other factors affecting minimums
When estimating next months minimum, keep these factors in mind:
Overdue payments or over-the-limit balances can change the math. With either method, an issuer may add any amount of your balance thats already past due or over the card’s limit to your minimum payment.
Billing cycles often dont start at the beginning of the month. Make sure you know when your billing cycle ends and begins before estimating. Your statement balance will differ depending on whether it begins on, say, the 11th of each month versus the 13th. If you’re unsure, call your issuer.
Why isnt your minimum smaller? Federal guidance directs issuers to avoid “negative amortization. ” That means that the minimum payment shouldnt be lower than the rate at which interest accrues.
Under this guidance, for example, issuers typically wouldnt offer a card with a 2% minimum payment and a 30% APR (2. 5% per month). Thats because if you paid the minimum on it, your payment would be lower than your interest charges. Your balance would continue to grow even if you didnt make new purchases. With today’s minimums, on the other hand, your balances will usually go down every month, though only slightly, if you don’t buy anything new.
How minimum payments are calculated
A minimum payment is exactly what it sounds like: It’s the bare minimum you’re contractually obligated to pay each billing cycle. There is a chance that you will be charged a late fee and penalty APR if you don’t pay the minimum by the due date. If you don’t pay the minimum for 30 days, your account could be marked as delinquent, and your credit score could go down.
“The minimum is really useful if people are a little short of income in a particular month — for example, when they’re in between jobs or they recently had a large expense,” says Nessa Feddis, senior vice president for consumer protection and payments at the industry group American Bankers Association. “But it’s not something that should be routine.”
In part, thats because the minimum is usually so low that it just barely exceeds the interest charges that accrue each month on your balance. When youre just paying the minimum, it could take years — in some cases, decades — to pay off your full balance. Paying only the minimum could also send up red flags to other lenders, suggesting that you struggle to repay debts, Feddis adds.
Did you know? In the 1970s, minimum payments equal to 5% of the outstanding balance were the norm. Since then, issuers have reduced the payments — in part because lower minimum payments created more profitable accounts.
Assuming you owe enough that your calculated minimum payment exceeds your issuers fixed floor rate, your minimum payment will probably be calculated in one of two ways:
On some cards, issuers use a flat percentage — typically 2% — of your statement balance to determine your minimum. If your balance (including interest and fees) were $10,000, for example, you’d owe a minimum of $200.
This method is most often used by credit unions and subprime banks, according to a 2015 study by the Consumer Financial Protection Bureau.
Some cards charge a lower flat percentage of your statement balance, excluding fees and interest — say, 1% — and then tack on all the interest charges and fees accrued that cycle. Suppose your balance (before interest and fees) is $10,000 and you’ve accrued $160 in interest and $38 in late fees. If your issuer calculates your minimum as 1% of the balance plus interest and fees, you’d have a minimum payment of $298.
You can calculate it in two steps:
$10,000 balance x 1% (0.01) = $100
$100 + $160 in total interest accrued + $38 in late fees = $298 owed as a minimum payment
This method is most commonly used by large issuers, according to the CFPB’s findings.
Credit Card Minimum Payments Explained
FAQ
What is the minimum monthly payment on a $10,000 credit card?
So, chances are you can speed up the payoff process significantly by making fixed payments. In the example above, if your credit card company calculates payments as 1% of your balance plus interest, your minimum payment on $10,000 in credit card debt would be about $300.
How long will it take to pay off $10,000 in credit card debt?
The time it takes to pay off $10,000 in credit card debt varies significantly based on the monthly payment amount and the interest rate. Making only minimum payments, it could take decades.
How do I calculate my minimum payment on my credit card?
Percentage of Outstanding Balance: Most of the time, credit card companies figure out your minimum payment based on a percentage of your outstanding balance, which is usually something between 1% and 3%. For example, if you have a $1,500 balance and your card issuer requires a 2% minimum payment, you would owe $30 for that billing cycle.
What is the minimum payment on a $3000 credit card Chase?
Chase’s standard flat fee is $35, so that’s probably the least you’ll have to pay on a $3,000 credit card balance.