What is Minimum payment?
Each card sets its own formula in the cardholder agreement; a U.S. disclosure rule illustrates one as 2% of the balance or $20, whichever is greater. If the payment is smaller than the month's interest, the balance grows even though every payment is on time. In Academy's lessons (J1) the minimum is the larger of $25 or 1% of the statement balance plus that month's interest, a case assumption rather than a standard formula.
Also called minimum due, minimum amount due, minimum payment due
Academy's J1 model: Minimum = larger of $25 and (1% × statement balance + month's interest), never more than the statement balance
Card A, first month (illustrative, lesson J1)
- Statement balance
- $2,658.50
- 1% of it + interest
- $26.59 + $58.50
- Minimum due
- $85.09Card B: $7.11 + $10.50 = $17.61, so the $25 floor applies
On time is not paying down
Under a 2%-or-$20 minimum with no interest added, Card A ($2,600 at 27% APR) ends 12 months at $2,664.66, higher than it started. U.S. statements must warn how long minimum-only repayment takes.