Calculate the minimum monthly payment for your credit card and work out how much you should be paying to take control of your debt.
When you look at your credit card statement each month, you'll see both the closing balance and a "minimum monthly repayment" amount. While the closing balance is everything you owe, the minimum repayment shows what you have to pay off the card by the due date in order to keep your account in good standing.
Although making minimum repayments gives you the flexibility to pay off your balance over time, it can also lead to ongoing credit card debt, interest charges and other risks. Use this guide to learn how minimum repayments are set and what happens if this is all you pay each month. We also look at how to calculate your credit card minimum repayment and ways to save money so that you can make your credit card work for you.
What is the minimum I need to pay on my credit card?
Your card issuer sets the minimum monthly repayment on your credit card. This amount varies between credit card issuers but is usually calculated as 2–3% percent of your closing balance, with a minimum dollar charge of around $20 to $30.
To give you an idea of these costs, here are the minimum monthly repayment requirements of some popular credit card issuers:
- American Express credit cards: The higher of $30 or 2.5% of your closing balance
- ANZ credit cards: The higher of $25 or 2% of the closing balance
- CommBank credit cards: The higher of $25 or 2% of the closing balance
- NAB credit cards: The higher of $25 or 2% of the closing balance
- St.George credit cards: The higher of $10 or 2% of the closing balance
- Westpac credit cards: The higher of $10 or 2% of the closing balance
Every time you get a credit card statement, the minimum repayment amount will be shown in dollars. This means you won't have to calculate the percentage owed if you carry a balance.
Will I be repaying my credit card debt if I just pay the minimum?
If you only make the minimum monthly payment, you will still pay off some of the money you owe but a large portion of your repayment will go towards paying off interest charges. This is because there are two factors that make up your minimum monthly repayment amount: the balance portion and the interest portion.
How to calculate the balance portion of your repayment
- On a $5,000 card balance with a minimum repayment of 3% for example, you’d need to pay at least $150 each month.
- You can calculate how much 3% of your balance is with the following formula: (3/100) x (your balance) = (your balance repayment amount).
The minimum payment will also be included on your credit card statement. Aiming to pay more than this amount will help reduce your interest charges and pay off your debt faster.
How to calculate the interest portion of your repayment
Unless your card has an offer of 0% interest for balance transfers or purchases, interest is also added on top of the amount you charge to your card each month. Here's how you can calculate the amount of interest you’ll accrue:
- To estimate the amount of interest included in your monthly repayment, use this calculation: (interest rate, eg, 15% /100) x (your balance, eg, $5,000) ÷ (months, eg, 12) = (your initial interest repayment amount). Using this calculation, you can see that your interest payment will be $62.50.
- In this case, the interest portion of your repayment will be around 41.6% of a minimum payment of $150.
As you continue to pay down your debt, your interest charges will also reduce each month as your balance decreases. Similarly, if you only pay the minimum repayment and your debt continues to grow with interest, your interest payments could increase with time.
With so much of your minimum repayment going towards interest charges, it's ideal for you to aim to pay your credit card balance off in full each month. This helps you avoid more interest charges and debt.
What will happen if I just make the minimum credit card repayment?
While it may sometimes be tempting to only make the minimum monthly repayment on your credit card, you should avoid doing this whenever possible for a few reasons:
- Repayment takes longer. It will take you a much longer time to repay the money you owe. Depending on your balance and the card’s interest rate, this could add several years to your repayment period.
- It costs more. The longer you carry a debt on your credit card, the more interest will be charged to your account. This means your credit card debt could end up costing you thousands of dollars more and will take much longer to pay back.
- It will affect your credit score. If you continually carry a balance on your credit card that takes up a large portion of your overall card limit, this can impact on your credit score.
If you want a better idea of just how much only making the minimum credit card repayment will affect your finances, check your credit card statement. This shows how long it will take you to repay your debt if you only repay the minimum as well as the total interest you will have to pay.
Matt’s minimum repayments
Matt is a 30-year-old teacher from Brisbane who has a $5,000 debt on a credit card with an interest rate of 15% p.a. He wants to pay this off by working out the most efficient way to pay down his debt.
The minimum monthly payment on his latest credit card statement is $102 (2% of his closing balance) but Matt decides to calculate how much he can save if he starts putting money aside and paying $250 off his card each month. He draws up a table to calculate the costs of his minimum and higher credit card payments.
|If making minimum monthly repayments||If making higher monthly repayments|
|Credit card debt||$5,000||$5,000|
|Interest rate||15% p.a.||15% p.a.|
|Monthly repayment amount||$102 (initially - amount decreases each month as closing balance also drops)||$250|
|Total time to pay off debt||23 years 10 months||1 year 11 months|
|Total amount paid||$12,030||$5,707|
|Total amount saved||-||$6,323|
As you can see from the table, Matt can save a massive $6,323 by making higher repayments and paying his debt off in less than two years. However, if he were to continue to only make the minimum required payment, it would take Matt almost 24 years to get out of debt. This clearly demonstrates why you should always try to pay more than the minimum monthly payment if possible.
Paying down a credit card debt with a promotional interest rate
Some credit cards offer promotional interest rates that apply to purchases or balance transfers during the introductory period. These offers can help you save money if you know you need to use your card to pay for something, or if you have existing debt you want to pay off.
If you're interested in getting a credit card with a low or 0% introductory interest rate, make sure you think about the following factors when calculating your repayments:
- Revert rate. While 0% p.a. interest may apply to your balance transfer or purchases now, you need to be aware of what interest rate the card will revert to once the promotional period ends.
- Length of promotional period. How long does the low or zero interest period last? Depending on the credit card you select, these introductory promos last for anywhere between 3 and 24 months. The revert rate will apply to your balance as soon as the promotional period ends, so you will want to pay off your debt before that occurs.
- Additional purchases. If you make more purchases on your credit card, your total balance and minimum monthly payment will both increase. You will need to be aware whether your minimum monthly payments will then go towards paying off your initial balance or towards repaying your new purchases.
- Annual fee. Most credit cards charge an annual fee when you first open your account and then every 12 months on the anniversary of that date. This could add to your balance when you get a card that offers 0% interest during the introductory period, so make sure you factor that cost into your repayments.
Finally, it’s crucial to be aware that making only the minimum repayment each month will not result in the debt being paid down within the promotional period. This means that a higher revert rate will apply to your balance at the end of the introductory period, which will increase the amount you need to repay and could lead to further debt.
Frequently asked questions
Want to know more about calculating credit card payments or minimum payments? Here we have answered some of the most common questions people ask us. You can also use the form below to get in touch with us if you have any other questions.
What is a credit card payment calculator?
A credit card payment calculator is an tool that you can use to work out how long it will take to pay off your debt and how much interest you'll pay during that time. There are many different credit card repayment calculators available online, each with a slightly different layout. Generally, you'll need to enter the following details:
- The amount of debt on your card
- The interest rate you're paying
- Your minimum payment amount
- A higher payment amount
Some calculators also have sections where you can enter the annual fee, a lower interest rate (to compare cards) or other details that could have an impact on your debt and repayments. If you decide to use a credit card repayment calculator, remember that the information it provides is only a guide and the calculations are estimates, so your actual payments could be different.
Should I use a credit card payment calculator?
This depends on what you're hoping to achieve. If you want to get a general idea of how long it will take to pay off your debt, a credit card payment calculator could be useful for helping you budget for repayments. Similarly, if you want to save money on your repayments by switching to a card with a low or 0% balance transfer rate, a calculator that includes fields for different interest rates – such as the one included on our balance transfer credit card comparison table – can help you find a card that suits your needs.
The important thing to remember when you use a credit card payment calculator is that the results are only estimates. What you end up paying may vary for any number of reasons, including the card, the way interest is calculated on your account, whether or not you make new purchases and the annual fee. The bottom line is that credit card calculators can be useful but only to a point. Considering your individual circumstances is key to deciding how you manage your credit card payments.
What happens if I fail to make even the minimum monthly payment before the due date?
Fees and charges for late payment may apply. This could lead you further into debt and also damage your credit score.
Where can I access a copy of my credit card contract?
This will be available from your card issuer.
Will I still be charged interest if I make the minimum repayment?
Yes, interest charges will still apply.
Is there anything I can do to reduce the interest charged on my debt?
Yes, here are three options you can consider depending on your circumstances:
- If you have existing credit card debt. You may wish to move it to a new balance transfer credit card that offers an introductory low or 0% interest rate.
- If you have upcoming purchases you need to make. You could look at a card with an introductory 0% purchase rate.
- If you often carry a balance. Switching to a card with a low ongoing interest rate could help you save on interest charges when compared to cards with higher interest rates. But it would still be ideal to pay more than the minimum and avoid carrying a balance whenever possible.