If you can't afford to pay off your entire credit card bill when it arrives, or if you prefer not to, then you are given the choice between paying the minimum repayment required or a sum in between the minimum and the full balance. How is a credit card minimum payment worked out?

What Is a Minimum Payment on a Credit Card?

Credit card companies are more than happy for you not to pay off what you spend every month. If you carry borrowing over a specific payment period, then they can start to charge interest on what you owe. They do, however, ask that you pay a minimum payment for every bill. This essentially keeps your account ticking over and is the lowest sum that you can put toward clearing a card.

How Is a Credit Card Minimum Payment Worked Out?

The amount you'll be asked to pay here will vary according to the outstanding balance on your account. The more you owe, the higher the payment will be. Companies have two ways of setting the minimum repayment, either as a percentage of your debt or as a fixed amount of money. This is usually charged on a "whichever is higher" basis.