1. What is the Minimum Payment Calculation?

The minimum payment calculation determines the smallest amount you must pay on your credit card each month. It's typically the greater of a fixed amount or a percentage of your outstanding balance.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• Fixed Amount — The minimum fixed payment required by the credit card issuer
• Balance — The current outstanding balance on the credit card
• Percentage — The percentage of balance required as minimum payment (expressed as decimal)

Explanation: The calculation ensures you pay at least the fixed minimum amount, or a percentage of your balance if that amount is higher.

3. Importance of Minimum Payment Calculation

Details: Understanding minimum payments helps avoid late fees, maintain good credit standing, and plan personal finances effectively. However, paying only the minimum can lead to significant interest charges over time.

4. Using the Calculator

Tips: Enter your current card balance in GBP, the fixed minimum payment amount in GBP, and the percentage of balance required (as a decimal between 0 and 1). All values must be valid non-negative numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why do credit cards have minimum payments?
A: Minimum payments ensure cardholders make regular payments toward their debt while maintaining flexibility in their budget.

Q2: What happens if I only pay the minimum?
A: While it keeps your account in good standing, you'll pay more interest over time and it will take longer to pay off your balance.

Q3: How is the percentage typically determined?
A: Credit card issuers typically set this between 1-3% of the outstanding balance, though terms vary by card.

Q4: Can the fixed minimum amount change?
A: Yes, credit card companies may adjust fixed minimum amounts, though they typically notify cardholders in advance.

Q5: Should I always pay more than the minimum?
A: Yes, paying more than the minimum reduces interest charges and helps you become debt-free faster.