Credit glossary
Minimum payment
The smallest amount you must pay by the due date to keep a credit card or loan account in good standing for that month.
Paying the minimum on time keeps an account current for credit reporting, but it leaves the rest of the balance accruing interest. Regulation Z requires card statements to carry a minimum payment warning, along with estimates of how long repayment would take at the minimum, the total cost of doing that, and the monthly payment that would clear the balance in 36 months.
Minimums feed other numbers too. Lenders count card minimums in your debt-to-income ratio, and Fannie Mae's guide uses 5% of the balance when a revolving account shows no payment. If you fall behind, a card's minimum usually includes the past-due amount, so paying only the new minimum leaves you behind. Autopay set to at least the minimum is cheap insurance against a reported late.
Guides that go deeper
- Debt snowball vs. avalanche: the real dollar difference, worked outWe ran four real-looking debts through both payoff methods month by month. Avalanche saved $167 here, snowball won its first payoff 9 months sooner.
- 30, 60 and 90 days late: how the damage grows each monthA missed payment can be reported as 30, then 60, then 90 days late. See how lates stack, why one payment may not catch you up, and how to stop the slide.
- Autopay failures and missed payments: what went wrong and what to doAutopay fails more often than people think: closed accounts, replaced cards, servicer transfers. How each failure plays out and when it reaches your report.
Sources
- 12 CFR 1026.7, Periodic statement (Regulation Z), eCFR
- B3-6-05, Monthly Debt Obligations, Fannie Mae Selling Guide
- CFPB Finds CARD Act Reduced Penalty Fees and Made Credit Card Costs Clearer (Oct. 2, 2013), Consumer Financial Protection Bureau
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