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Credit card minimum payments

What is a credit card minimum payment?

published: 24 January 2022
Read time: 5 minutes

Everything you need to know about minimum payments on credit cards

What is a credit card minimum payment?

A credit card minimum payment is the minimum amount you need to pay off on your credit card balance each month. In the UK, your minimum monthly payment will always be at least 1% of your outstanding balance – although it could be more depending on your card provider.

If you don’t make the minimum payments on your credit card, you’ll be hit with a late charge, plus it could hurt your credit score.

Man paying in a shop

How do minimum payments work on credit cards?

When you get your credit card statement or bill each month, it’ll show you the minimum you need to pay. There are two ways to pay:

  • By direct debit. You can set up a direct debit with your credit card issuer to pay a certain amount each month – that could be the full outstanding balance, the minimum payment or a fixed monthly amount

  • By manual payment. You could also simply make a bank transfer to your credit card provider when you get your bill – but make sure you don’t forget, or you could face high penalty fees

How is my minimum payment calculated?

Your monthly minimum payment will be calculated in one of two ways:

  • As a percentage of the amount you owe – for instance, if you’ve borrowed £2000 on your card, and your minimum payments are set at 2.5%, you’ll have to pay at least £50 per month off your balance, plus any interest

  • As a flat fee – say £10 or £20 a month

You don’t get to choose between these – your credit card provider will work out which of these is larger, and that’s what you’ll have to pay.

If you only pay back the minimum amount required on your card each month it’ll take longer to fully clear your debt. This also mean you’ll pay more interest overall. For this reason, it’s a good idea to always try to pay off more than the minimum whenever possible.

What are the advantages of paying more than the minimum payments?

If you pay more than the minimum payment each month, your debt will be paid off much faster, and you’ll pay much less in interest overall:

Example 1: You’ve borrowed £2000 on a credit card and the card has a 2.5% minimum monthly payment. The interest rate or APR is 25%. If you only make your minimum payments, it will be almost 35 years before you’ve fully paid off your card. You’ll pay more than £5,000 in interest overall.

Example 2: For the same card deal above you’re able to pay more each month – for example £100 a month – the debt will be gone in just two years. The total interest you’ll pay will be £530.

So if you can afford it, paying off more than the monthly minimum is always cheaper in the long run.

You can see how long it will take you to pay off your credit card with our credit card calculator. Try adding £10 or £20 to your monthly repayments to see how much you could save overall.

What if I can only afford to pay the minimum payment?

It’s usually best to only spend on a credit card when you can afford to pay off the entire balance – but if you can only afford your minimum monthly payments, there are still some ways to avoid getting stuck in persistent debt.

For example, if your monthly minimum payment is high, consider getting a balance transfer card. These cards typically offer 0% interest for up to two years or more – which means lower monthly payments, and breathing room to help you pay off the debt more quickly.

What happens if I can’t afford my minimum payments?

If you think you can’t afford the minimum payment on your credit card speak to your card issuer straightaway. It should help you come to an agreement to help you manage your payments – for instance, by reducing or pausing your payments for a while. Bear in mind that this will usually mean your debt lasts longer, since you’ll still be accruing interest during this period.

There are other places you can seek free and impartial help if you’re facing financial difficulties, including the charities Citizens Advice and StepChange or the government’s Money Helper service.

Does making the minimum payment affect my credit score?

Making only the minimum monthly repayment on your credit card is unlikely to affect your credit score in the short term. Making the required minimum repayment on time each month is important for maintaining your score.

However, if you are only making minimum repayments, and you continue to use your credit card then your debt is likely to grow over time. This can have a negative impact on your credit score. This is because if you are using a lot of credit each month – particularly if your debt is high relative to the total amount of credit you have available, lenders tend to view this negatively and this could lead to a decline in your credit score.

Our free credit monitor can help you to keep track of your credit score and your regular debt repayments. You can look at your score as often as you like without damaging it and you’ll be alerted if we spot anything suspicious on your account.

How can I make sure I meet my credit card payments?

One way to ensure you meet at least the minimum payment for your credit card is to set up a direct debit for the minimum amount. This way you can rest assured the payments will at least be met automatically.

Another option might be a balance transfer credit card, which would allow you to move an existing card balance to a new credit card with a 0% interest rate. This could help you manage your payments and reduce your overall balance quicker. Use our eligibility checker to find cards you’re eligible for and see your chances of getting the card deal – all without affecting your credit score.

Other useful guides

If you’d like to find out more about credit cards and how to keep on top of your payments, we’ve got plenty of handy guides, including...

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