How do credit card companies calculate the minimum payment?

One of two formulas, stated in your cardholder agreement: a flat 1-3% of the statement balance (most commonly 2%), or accrued interest and fees plus 1% of the balance — each with a $25-$40 floor. The second formula guarantees 1% monthly principal reduction; the first can leave almost nothing for principal at 20%+ APRs.

How long does it take to pay off $5,000 making minimum payments?

Under a 2%-of-balance minimum: about 21 years at 15% APR, 40 years at 20%, and 68 years at 22% — with total interest of $6,800 to $36,000. Under an interest-plus-1% minimum, about 18-19 years at any common APR. Fixing the payment at the first minimum amount instead cuts either timeline to roughly 5-6 years.

Why does the minimum payment barely reduce my balance?

Under the flat-percentage formula, most of the minimum goes to interest: on $5,000 at 22% APR, a ~$102 minimum covers ~$92 of interest, leaving ~$10 of principal. The payment also recalculates downward as the balance falls, so principal progress decays over time — the defining mechanic of the minimum payment trap.

Does minimum payment payoff time change with a larger balance?

No, under the flat-percentage formula. Payoff time depends only on APR and the minimum percentage, not the starting balance, since the minimum is always proportional to the current balance. A $2,000 balance and a $20,000 balance at the same 22% APR both take about 68 years — only the dollar amounts of interest and payments scale.

Can a credit card balance grow even if I make minimum payments?

Yes, in edge cases. Under a 2% minimum with a low floor, APRs above roughly 24.5% accrue more monthly interest than the minimum pays, so the balance rises despite on-time payments. Interest-plus-1% formulas can't produce this outcome, which is one reason many issuers adopted them.

Credit Card Minimum Payment Calculator & APR Tables (2026)

The Two Minimum Payment Formulas Issuers Use

The quick answer

Nearly every U.S. card issuer computes your minimum payment one of two ways: a flat percentage of the statement balance (typically 1–3%, most commonly around 2%) or accrued interest and fees plus 1% of the balance — each with a dollar floor, usually $25–$40. The structural difference matters enormously: the flat-percentage formula can leave almost nothing for principal at high APRs, while the interest-plus-1% formula guarantees the balance shrinks by 1% a month. Both are simulated in full below and in our credit card payoff calculator.

Formula A (flat %): Minimum = max(Floor, Balance × p) · Formula B (interest-plus): Minimum = max(Floor, Interest + Fees + Balance × 1%)

Variables

p — the issuer's percentage, typically 1–3% of the new statement balance

Interest — Balance × APR ÷ 12 (issuers compute daily; monthly is equivalent within pennies)

Floor — the minimum dollar amount, commonly $25–$40; the full balance is due if below the floor

Example: On $5,000 at 22% APR: Formula A at 2% bills about $102; Formula B bills about $142 — of which $50 (exactly 1% of balance) is guaranteed principal.

Key takeaways

Two formulas dominate the industry: flat 2% of balance, or interest-plus-1% — check your cardholder agreement, since the difference changes payoff time by decades at high APRs.
Under the CARD Act, every statement discloses a minimum-payment warning with an estimated payoff time and a 36-month comparison payment, per CFPB rules.
Above roughly 24.5% APR under a 2%-of-balance minimum, the balance can grow even with on-time payments — the minimum simply doesn't cover the month's interest.
Fixing your payment at the first minimum amount and never letting it decline collapses a 40+ year payoff to roughly 5-6 years, at no extra cost in month one.

Credit card statement showing a minimum payment due amount. — The minimum-payment warning box required on every statement is built from exactly the simulation math on this page. Photo by Pixabay on Pexels

Your cardholder agreement states which formula applies; the phrase to look for is either "2% of the New Balance" or "1% of the New Balance plus interest and fees". Under the CARD Act, every statement must also carry a minimum payment warning disclosing how long minimum-only payoff takes and a 36-month comparison payment — the disclosure requirement is described in the CFPB's minimum payment warning explainer.

Simulated Payoff Tables: $5,000 on Minimums Only

The tables below simulate a $5,000 balance month by month under each formula (with a $25 floor and no new charges) at every common APR. This is the exact arithmetic behind the statement warning box.

Formula A — 2% of balance:

APR	First minimum	Time to pay off	Total interest
15%	~$101	21 yr 6 mo	$6,772
18%	~$102	29 yr 6 mo	$11,689
20%	~$102	40 yr 6 mo	$18,500
22%	~$102	68 yr 1 mo	$35,958
24%	~$102	over 300 yr	$192,464

Month-by-month simulation, 2% minimum with $25 floor. At 24% APR the 2% payment exceeds monthly interest by so little that payoff is effectively impossible; above ~24.5% the balance grows forever.

Formula B — interest + 1% of balance:

APR	First minimum	Time to pay off	Total interest
15%	~$113	17 yr 11 mo	$5,382
18%	~$125	18 yr 6 mo	$6,539
20%	~$133	18 yr 10 mo	$7,317
22%	~$142	19 yr 2 mo	$8,100
24%	~$150	19 yr 6 mo	$8,887

Same simulation under the interest-plus-1% structure. Because principal reduction is fixed at 1% of the declining balance, payoff time is nearly APR-independent — around 18-19 years — while total interest still scales with the rate.

The headline numbers, plainly

Under the most common formula, a $5,000 balance at today's typical 20%+ APRs takes 40 to 68+ years to clear on minimums, with total interest of 3.7× to 7× the original balance. Under the more borrower-friendly interest-plus-1% formula it still takes about 19 years. Either way, the escape is identical: fix your payment at the first minimum and never let it decline — that single change collapses the timeline to roughly 5-6 years with no extra outlay in month one.

Run the numbers

Credit Card Payoff Calculator

Run your own balance, APR, and minimum percentage — or switch to a fixed payment or target date and watch the curves separate.

Simulate your balance

The Same Math at $2,000 and $10,000

The mechanics above use $5,000 as the reference balance, but the trap scales predictably to any balance since both formulas are percentage-based. Here's the 2%-minimum formula at 22% APR across common balances:

Balance	First minimum (2%)	Time to pay off	Total interest
$2,000	~$41	68 yr 1 mo	$14,383
$5,000	~$102	68 yr 1 mo	$35,958
$10,000	~$204	68 yr 1 mo	$71,916
$20,000	~$408	68 yr 1 mo	$143,832

22% APR, 2%-of-balance minimum with a $25-$40 floor (floor doesn't bind at these balances). Payoff time is identical across balances because the formula is purely proportional — only the dollar amounts of the minimum and total interest scale.

Why payoff time doesn't change with balance

Because the minimum is always the same percentage of whatever balance remains, the ratio between interest owed and principal paid stays constant regardless of starting balance — so the 68-year timeline at 22% APR is the same whether you start at $2,000 or $20,000. Only the dollar amounts scale. This is exactly why the fix (a fixed, non-declining payment) works identically at any balance.

Run the numbers

Credit Card Payoff Calculator

Run this exact simulation on your own balance and APR, or compare fixed-payment and target-date payoff plans.

Simulate your own balance

Methodology & How to Cite This Page

How we researched this

All payoff times and interest totals on this page are computed by month-by-month simulation: each month accrues interest at APR ÷ 12 on the current balance, applies the stated minimum formula with a $25 floor, and repeats until the balance reaches zero. No new purchases, fees, or rate changes are assumed. The same simulation engine powers our credit card payoff calculator, so every figure here is reproducible on the tool. APR context reflects Federal Reserve G.19 data showing average assessed card rates above 20% since 2023. Figures last recomputed July 2026; this page is updated when average rates or common issuer formulas change.

Writers and educators are welcome to cite these tables with a link to this page. For the underlying regulatory framework: minimum payment warnings and the 36-month disclosure are CARD Act requirements implemented in Regulation Z; the CFPB maintains the consumer-facing explanations linked below, and current average card APRs are published in the Federal Reserve's G.19 release.

Sources & further reading

1What is a minimum payment warning? — Consumer Financial Protection Bureau
2What is a minimum payment on a credit card? — Consumer Financial Protection Bureau
3Consumer Credit — G.19 (average card interest rates) — Federal Reserve
4Regulation Z (Truth in Lending) — Consumer Financial Protection Bureau

Credit Card Minimum Payment Math: Formulas, Payoff Times & APR Tables (2026 Reference)

The Two Minimum Payment Formulas Issuers Use

Simulated Payoff Tables: $5,000 on Minimums Only

The Same Math at $2,000 and $10,000

Methodology & How to Cite This Page

Frequently asked questions

Run the numbers yourself

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