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Credit Card Minimum Payment: What You Need To Know

Banks typically state their "minimum payment" on a credit card is the smallest amount of money you’re required to pay on your bill. Failing to pay at least this amount of your bill can result in varoius penalties like late payment fees, interest charges and lower credit scores. Each bank has a different method for calculating a credit card’s monthly minimum payment, though most banks require a minimum of S$50.

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Minimum Credit Card Payment by Issuer

Though there are some variations in how banks calculate their minimum credit card payment, most banks require at least S$50 or 3% of total principal outstanding balance, whichever is higher, plus any overdue amount. In general, this minimum requirement is meant to be large enough so that the cardholder pays at least some portion of their principal balance. In theory, such a rule prevents banks from setting minimum payments that would result in negative amortization, which could mislead a card user to pay less than his interest and end up with an unbearable amount of credit card debt.

IssuerMinimum Payment FormulaYour Minimum Payment Will Be At Least
ANZS$50 or 3% of the total principal outstanding balance, whichever is higher, and any overdue amountS$50
American Express3% of the outstanding balance plus the total sum of any overdue minimum payment and late payment charges, and any amount exceeding your credit limit, or S$50, whichever is greaterS$50
CIMB3% of the outstanding balance or S$50, whichever is higher plus any amount that is overdue and/or exceeds your credit limitS$50
Citibank1% of the current balance plus 1% of any outstanding unbilled instalment amounts plus interest charges and fees or S$50, whichever is greater, plus any overdue amountsS$50
DBS & POSB3% of the statement balance or S$50, whichever is greater plus any amount that is overdue and/or exceeds your credit limitS$50
HSBC3% of the outstanding balance or S$50, whichever is greaterS$50
Maybank3% of outstanding balance or S$20, whichever is higher, plus any outstanding amount "Past Due" from previous statementsS$20
OCBCS$50 or 3% of the Total Balance, whichever is higher, and any overdue amountS$50
Standard CharteredS$50 or 1% of your principal plus interest, fees and charges, whichever is higher, plus any amount in the account balance exceeding your credit limit and any past due amountS$50
UOB3% of current balance or S$50, whichever is higher, plus any overdue amountsS$50
*Unless otherwise noted, the minimum payment will also include any past due amounts or late fees.

Note that the above formulas are current as of the time of writing this article, and are subject to change. You can always find your current minimum payment formula in your cardmember agreement. If you don't have a copy of it, you can call your bank and ask that a copy be sent to you.

What Happens If You Pay Just The Minimum Amount Due On Your Credit Card

Although the credit card minimum payment requirement is meant to protect consumers, making just the minimum payments every month is a highly dangerous practice. For one, it can cause you to carry a balance for an extremely long time as well as have negative impacts on your credit score.

The minimum payment, contrary to some myths, is not designed to pay off your balance in 10 months. Instead, making only the minimum payments can actually result in you having to pay down your balance for upwards several years or more. For example, we modeled out and graphed the change in a sample outstanding credit card balance as a result of several different repayment options, including sticking to just the minimum. The graph below shows how quickly balances go down based over a 24-month period, for a principal balance of S$10,000 at an APR of 25%.

A graph showing how quickly your credit card balance will go down with different repayment schedules.

In the above example, the individual making just the minimum payments on the S$10,000 of balance would pay S$4,043 in interest charges over two years. Paying just twice the minimum payment reduces the interest charges by S$1,119. Those who could manage to pay 4 times the minimum payment would save $2,388 in interest. Extending this calculation also showed that it would take about 21 years for someone to pay off S$10,000 in credit card bill by only making the minimum payment.

What Does Paying The Minimum Amount Due Mean For Your Credit Score?

Paying only the minimum monthly requirement on your credit card bill has no direct impact on your credit score. However, there are indirect effects that consumers shoudl be aware of. First, there is the potential risk of increasing one's overall credit utilisation – a factor that can negatively influence your credit score. Credit utilisation refers to the percentage of your total available credit limit you are using. For example, if your outstanding balance is S$400, and your available line of credit is S$1,000, your utilization would be at 40%.

In general, it is best to keep your credit utilisation below 30%. Although there is no radical shift that happens once you reach 30%, being close to maxing out your credit limit can be quite bad for your credit score. When you make just the minimum credit card payments, however, your balance and your credit utilisation declines by the lowest possible amount. If you are close to having maxed out your credit card, paying just the minimum will cause your issuer to report a high utilisation ratio to the credit bureaus.

Consequences of Paying Less Than The Minimum Credit Card Payment

There are many consequences of paying less than the minimum amount due on a credit card will have a series of negative consequences. Of course, the most obvious one is having to pay late payment fees. On top of any late payment charges you’ll have to pay, your issuer may also report your tardiness to the credit bureaus, which will leave a long-lasting impact on your credit report and credit scores. In most cases, paying less than the minimum amount due will be treated as if you did not pay your bill at all. Unless you officially worked out a separate payment plan with your issuer, you are contractually obligated to pay at least the minimum.

Here are is a little more information about the three major consequences of paying less than the minimum amount due on your credit card:

  • Late Fees: Your issuer will charge you a late fee that you will be required to pay in full on your next billing statement. The fee will make your next month’s minimum payment larger than what it would have otherwise been. This fee generally ranges from S$50 to S$80.
  • Penalty APR: Paying less than the minimum amount due can cause your issuer to impose a penalty APR on your future balances. This special type of APR is much higher than average, often being as high as 29% to 30%.
  • Credit Score: Since paying less than the minimum amount due counts as a late payment, it also has a negative impact on your credit score.

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