How It Works

Credit card minimum payments are typically calculated as 1-2% of your balance plus interest charges, with a floor (usually $25-35). This formula explains why minimums barely reduce your debt.

Common Calculation Methods

Method 1: Percentage + Interest

=MAX(balance * 0.01 + (balance * APR/12), 25)

Method 2: Flat Percentage (including interest)

=MAX(balance * 0.02, 25)

Method 3: Percentage + Interest + Fees

=MAX(balance * 0.01 + interest + fees, minimum_floor)

Example

Credit Card Details:

Balance: $5,000
APR: 22%
Calculation: 1% of balance + interest

Monthly Interest:

=$5,000 * (22%/12) = $91.67

Minimum Payment:

=MAX($5,000 * 0.01 + $91.67, $25) = $141.67

Of that $141.67 payment:

$91.67 goes to interest
$50.00 goes to principal

This is why debt shrinks so slowly with minimum payments.

The Minimum Payment Trap

Let’s see the true cost of minimums:

Scenario	Monthly	Months	Total Paid	Interest
Minimum only	~$141	156	$9,738	$4,738
$200 fixed	$200	33	$6,600	$1,600
$300 fixed	$300	20	$6,000	$1,000

Formula for months to payoff (minimum only):

=NPER(APR/12, -minimum, balance)

This doesn’t account for decreasing minimums - actual payoff is even longer!

Why Minimums Decrease Over Time

As your balance drops, so does your minimum:

Month	Balance	Minimum	Interest	Principal
1	$5,000	$142	$92	$50
12	$4,435	$126	$81	$45
24	$3,934	$112	$72	$40
36	$3,489	$99	$64	$35

Each month you pay less principal, extending your payoff timeline.

Calculate Your Payoff Timeline

With Decreasing Minimums

This requires iteration, but you can approximate:

=balance / (minimum * 0.35)

(About 35% of minimum goes to principal on average)

With Fixed Payments

Much better - use PMT to find payment for a target timeline:

=PMT(APR/12, target_months, balance)

Example: Pay off $5,000 at 22% in 24 months:

=PMT(22%/12, 24, 5000) = $256.08/month

Minimum Payment Calculator

Build this in your spreadsheet:

Input	Value
Balance	$5,000
APR	22%
Min %	1%
Min Floor	$25

Output	Formula
Monthly Interest	`=B2*B3/12`
Calculated Min	`=B2*B4+B6`
Actual Minimum	`=MAX(B7, B5)`
Principal Paid	`=B8-B6`
% to Principal	`=B9/B8`

Pro Tips

Never pay just the minimum if you can avoid it - even $20 extra helps significantly
Fixed payment strategy: Note your current minimum and keep paying that amount even as the minimum decreases
Check your statement: Minimum payment calculation varies by issuer
Warning sign: If your minimum doesn’t cover monthly interest, your debt grows even while “paying”

The “Minimum Payment Warning”

Credit cards must show:

How long payoff takes with minimums
Payment needed to pay off in 3 years

Look for this box on your statement - it’s eye-opening.

Common Errors

#NUM! error: Balance might be zero or negative
Unrealistic minimums: Some cards have higher floors ($35-50) or different percentages

Credit Card Minimum Payment