1. What is Minimum Monthly Payment?

The minimum monthly payment is the lowest amount you must pay each month on a debt (like credit cards) to keep the account in good standing. It's typically calculated as the greater of a fixed minimum amount or a percentage of the current balance.

2. How Does the Calculator Work?

The calculator uses the following formula:

Where:

• \( \text{Fixed Min} \) — The base minimum payment amount (e.g., $25)
• \( \text{Balance} \) — The current outstanding balance
• \( \% \) — The percentage of balance required as minimum payment (e.g., 0.01 for 1%)

Explanation: The calculator compares the fixed minimum amount with the percentage of your balance and selects whichever is higher as your required minimum payment.

3. Importance of Minimum Payment Calculation

Details: Understanding your minimum payment helps with budgeting and debt management. While paying only the minimum keeps your account current, it results in paying more interest over time.

4. Using the Calculator

Tips: Enter your current balance in USD, the minimum payment percentage as a decimal (e.g., 0.01 for 1%), and the fixed minimum amount in USD. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why do credit cards have minimum payments?
A: Minimum payments ensure lenders receive at least some payment each month while giving borrowers flexibility in managing their cash flow.

Q2: Is paying only the minimum payment a good idea?
A: While it avoids late fees, paying only the minimum results in higher interest costs and longer repayment periods. Always pay more than the minimum when possible.

Q3: How is the percentage determined?
A: The percentage is set by the lender, typically ranging from 1% to 3% of the outstanding balance.

Q4: Can the fixed minimum change?
A: The fixed minimum is determined by the lender and may change based on your account terms or creditworthiness.

Q5: What happens if I pay less than the minimum?
A: Paying less than the minimum may result in late fees, penalty APRs, and negative marks on your credit report.