What is the minimum payment on a credit card?

If you’ve ever used a credit card, you’ve likely come across the term “minimum payment”. But what does it really mean? Understanding the minimum payment on a credit card is essential for managing your finances wisely and keeping a good credit score. Here, we’ll explain minimum payments on credit cards, why paying your balance in full is important, and how you can avoid credit card interest by adding your existing card to your Curve wallet..

What is the minimum payment on a credit card?

The minimum payment on a credit card is the smallest amount of money you’re required to pay each month to keep your account in good standing. It typically includes a portion of the principal balance (the amount you owe), plus any interest charges and fees. 

Most credit card issuers calculate the minimum payment as a small percentage of your total balance, usually around 1% to 3%, or a fixed amount such as £25. It’s worth noting that card providers usually take the bigger of these two values when setting your minimum payment.

For example, if you owe £1,000 on your credit card and the minimum payment is 3%, your minimum payment would be £30. However, if there are additional fees or interest charges, the payment will be higher.

The minimum payment will differ depending on your credit card provider, so make sure to check your terms in full when you apply so that you have all the facts and can stay on top of your payments.

Why is it important to pay your credit card in full?

While the minimum payment ensures your credit card remains active and prevents late fees, it can be costly in the long run to only pay your minimum instead of paying off your balance in full:

1. Accumulated interest

When you don’t pay your balance in full, your credit card issuer charges interest on the remaining amount. Credit card interest rates can be high, often ranging from 15% to 25% or more. This means that if you only make the minimum payment, the remaining balance will grow, and you’ll end up paying much more in interest over time.

2. Longer repayment time

If you continue making only the minimum payment, it can take years to pay off your balance, even if those payments are regular. This can leave you in a cycle of debt, where most of your monthly payment goes toward interest instead of actually reducing your balance and paying it off.

3. Credit score impact

Only making the minimum payment on a credit card over an extended period of time can hurt your credit score. High credit utilisation (the ratio of your outstanding balance to your credit limit) can negatively impact your score, making it harder to get approved for loans or additional credit in the future.

How to avoid credit card interest with Curve

The best way to avoid credit card interest is by paying off your credit card balance in full every month. This ensures that you don’t incur any interest charges on your purchases. It can, however, be a challenge if you’re carrying a balance across multiple cards. That’s where Curve can be a great solution.

Curve allows you to link all your credit cards into one digital wallet, simplifying how you manage your finances. Not only that, Curve can help you avoid credit card interest by letting you quickly and easily move transactions from one credit card to another. Here's how it works:

• Move transactions between cards: With Curve, you can transfer existing purchases from one credit card to another. This is useful if one of your cards has a higher balance or interest rate. By transferring the balance to a card with a lower interest rate or enough credit available, you can manage your payments more efficiently and pay the balance off in full before the due date.
  
  

• Pay off the full balance: Instead of making the minimum payment on one card, you can use Curve to consolidate your transactions and ensure that you can pay off the full balance across all linked cards. This strategy helps you avoid interest charges that can make it harder to pay off your debts.
  
  

• Extra flexibility: Curve gives you the flexibility to manage your finances and move money around, making it easier to pay off your credit cards in full each month. By doing this, you avoid the costly interest charges that come with making only the minimum payment.

Making the minimum payment on your credit card

Knowing and meeting the minimum payment on a credit card is vital to avoiding debt and staying in control of your finances. But keep in mind that while making the minimum payment each month keeps your account in good standing, it’s always best to pay off your credit card balance in full to avoid high interest charges.

Using tools like Curve to move transactions between cards and manage your payments can make it easier to pay off your balances in full and avoid credit card interest. Take control of your credit and stay in good financial health by doing more than meeting your minimum payment each month.