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If you want to maintain a positive relationship with your credit card issuers, you need to make at least the minimum payment on each of your credit cards every month. However, people who have a lot of credit card debt at high interest rates may discover that their minimum payments are getting higher and higher with every billing cycle – and harder and harder to pay.
If you are dealing with high minimum payments every month, you’re probably wondering how you can lower those payments and get a little more breathing room in your budget. The best way to reduce your minimum payment is by paying down your credit card balance – but there are a few other options you might want to consider.
Here’s what you need to know.
What is a minimum payment?
A credit card minimum payment is the lowest amount of money you can pay every month while still remaining in good standing with your credit card issuer. If you make less than the minimum payment during a credit card billing cycle, your credit issuer could report this negative information to the three credit bureaus – and it could damage both your credit report and your credit score.
It’s a good idea to always make the minimum payment on all of your outstanding credit cards – and if you can make more than the minimum payment, that’s even better. Making the minimum payment on your credit cards will keep you in good standing with your credit issuers, but you’ll need to make more than the minimum payment if you want to lower your balances, improve your credit score and pay off your credit card debt in full.
How is my minimum payment calculated?
Most credit issuers calculate your minimum payment as 1% to 3% of your total balance, plus interest charges and fees. You can refer to your monthly credit card statement to learn more about how your minimum payment is calculated – and how long it might take to pay off your debt if you only make the minimum payment on your credit cards.
How does your credit card balance affect your monthly minimum payment? The answer is simple. As your credit card balance gets smaller, your monthly minimum payment is likely to get smaller as well. On the other hand, adding to your credit card balance is likely to increase your minimum payment – first by increasing the amount that you owe as a percentage of your total balance, and second by increasing the amount you owe in monthly interest charges.
Will paying down my credit card balance lower my minimum payment?
Paying down your credit card balance is the best way to lower your minimum payment. Since your minimum payment is based in part on the total debt you owe to your credit card issuer, paying off a portion of your credit card balance can reduce your monthly minimum payment.
Lowering your minimum payment isn’t the only reason to pay down your credit card balance, of course. Paying off a portion of your credit card balance also reduces the interest you’ll pay on the remaining balance – since interest charges, like minimum payments, are based in part on your total outstanding debt. Plus, lowering your credit card balance has the potential to lower your credit utilization ratio and boost your credit score.
Will making a lump sum payment on my credit card lower my minimum payment?
Making a lump sum payment on your credit card can reduce your minimum payment – but only temporarily. If you make a single lump sum payment in order to lower your credit card balance, your minimum payment is likely to decrease. However, if you only make the minimum payment thereafter, new purchases and interest charges could raise your total balance to the point that your minimum payment goes up again.
What else can I do to lower my minimum payment?
Balance transfer credit cards
If you are looking for other ways to reduce your minimum payment, consider applying for a balance transfer credit card. By transferring your outstanding balances onto a single credit card, you can consolidate your debt into a single monthly payment – which could be lower than the multiple minimum payments you may be making on your current credit cards. The best balance transfer credit cards offer over a year of 0% intro APR on transferred balances, giving you time to pay down your balance before it starts accruing interest.
Balance transfer credit cards can help you lower your monthly credit card payments – but if you want to pay off your balance before your 0% intro APR offer expires, you’ll probably need to make more than the minimum payment. Use our balance transfer calculator to figure out exactly how much money to set aside every month and how much money you could save.
Hardship programs
There’s one more way to lower your minimum payment, and that’s by contacting your credit card issuer and requesting a hardship plan. Many credit card issuers are happy to work with responsible, reliable cardholders who are temporarily going through a period of financial difficulty. By explaining your situation, you may be able to get your monthly minimum payment reduced – or you may even be able to postpone making credit card payments for a short period of time.
Bottom line
Making at least the minimum payment on your credit cards every month is the best thing you can do to maintain good financial standing with your lenders – and if you need to lower your minimum payments, paying down your credit card balances is the best way to get the job done. However, you can also consider lump sum payments, balance transfer credit cards or credit card hardship programs.
No matter which path you choose, keep making at least the minimum payment on all of your open credit accounts – and whenever possible, try to pay a little more.
Editorial Disclaimer
The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.
Steve Bucci has been helping people decode and master personal finance issues for more than 20 years. He is the author of “Credit Management Kit For Dummies,” “Credit Repair Kit For Dummies,” “Barnes and Noble Debt Management,” co-author of “Managing Your Money All-In-One For Dummies” and “Debt Repair Kit For Dummies” (Australia). Steve is an experienced expert witness in identity theft, credit scoring, and debt-related cases. He has been a presenter at the FICO InterACT Global Conference, the Federal Reserve and the International Credit Symposium at Cambridge University in the UK.
Nicole Dieker is a freelance writer with a focus on personal finance and habit formation. She spent five years as a writer and editor at The Billfold, a personal finance site where people had honest conversations about money, and she regularly teaches classes on how to build your income as a freelancer.