Calculating Credit Card Minimum Payment

Author: jims2321
Joined: 23 Jun 2004
Posts: 1
Location: Mickey Mouse Land
Posted: Wed Jun 23, 2004 6:26 pm
Post subject: Calculation of Minimum Payments

This is probably a fairly simple and straight forward question but here it goes.... When calculating the minimum payment on a credit card, what is the usually percentage of the outstanding balance used in the calculation? Is there any place to get a list or idea of what each major credit card company's % is?

Jim

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Author: Verne
SENIOR MEMBER (Member for 2 yrs.+)
Joined: 14 May 2003
Posts: 488
Location: Midwest
Posted: Wed Jun 23, 2004 10:18 pm

The usual minimum is 2%. At the edge of the pool, where the water is calmer, more reputable or serious banks may want 2.5%. I've never seen anything higher in my limited 18 earth years (if I allow for Mercury in retrograde) of credit misuse and 20 plus credit card accounts. For the lowest min payments try to stay in the middle of the pool and enjoy the balance transfer frenzy.

Verne
Any agreement that can be changed at any time, for any reason, is no agreement at all.

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Author: Polonius
Credit Expert (100+ Posts)
Joined: 19 Jan 2004
Posts: 358
Posted: Thu Jun 24, 2004 9:14 am

Quote:
Minimum payments More than half the cards (53%) surveyed require cardholders to pay only 2% of the monthly balance each month. Last year’s survey found just 43% asking for only 2%. “Two percent is the gold standard now and that’s disturbing,” noted Sherry, who took the lead on the survey. “Low minimum payments keep consumers in debt forever and hike up interest.” If you pay only the 2% minimum payment on a $5,000 balance on a card with an APR of 11%, it will take you more than 23 years and $3,979 in interest to pay it off. By paying 5% of the balance, the time to pay off $5,000 drops to a little more than eight years and $1,099 in interest. Minimum monthly payments have another drawback—they go down over time as you pay off a balance. If you made the same $250 monthly payment every month until the balance was paid, you’d be free of the debt in 23 months, having paid only $549 in interest. “Obviously, card issuers wouldn’t mind if you only paid the 2% minimum payment because you’ll be paying them more than seven times the interest,” said Sherry. The average minimum payment on all surveyed cards is 2.38%. Of these, 76 (53%) cards have minimum payments of 2%; 33 have minimum payments between 2%-2.5% and 24 have minimum payments of 3%. The highest minimum payments found this year are on cards issued by Centura Bank, Helena National Bank and Arkansas National Bank, who ask cardholders for 4% to 5% of the balance each month. Five cards give you a range because the minimum payment varies by cardholder. US Bank sets the minimum payments on its World Perks card at between 2%-4% of the balance; Washington Mutual Bank (Citibank) and Providian charge between 2.5%-3%.

That's an excerpt from Consumer Actions' Credit Card Survey of 2003. More details are here:

consumer-action.org:16080/English/CANews/2003_March_CreditCard/

Polonius
"Neither a borrower, nor a lender be; For loan oft loses both itself and friend"

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