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How does my credit card issuer figure out my minimum monthly payment?

Most credit card companies require a minimum monthly payment of between 2 percent and 4 percent of the account balance. For example, if your card issuer requires 3 percent and you owe $800 this month, your minimum payment would be $24 ($800 x .03 = $24). To figure out how much of that is going to interest charges, divide your interest rate by 12 (months) to get the periodic (monthly) interest rate. Let’s say you’re paying 20% interest, your periodic rate would be .016666% (.20/12=.016666). Then multiple that rate by your outstanding balance (.016666 x $800 =$13.33) and you find out that $13.33 of your $24 payment is going toward interest and only $10.67 is going toward reducing your balance.

Bankrate offers an online credit card calculator.



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How does my credit card issuer figure out my minimum monthly payment?


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