What is a minimum repayment?

A minimum contractual repayment is the lowest amount you need to pay towards your credit card balance each month. Although you should try to clear the balance in full each month, if you can’t afford this, you must at least make the minimum repayment. This will help you to avoid extra charges and a negative impact on your credit score.

4 min read
man looking at paperwork

If you don't make the minimum repayment amount each month you could:

  • be charged by the lender
  • incur interest on what you owe
  • damage your credit score.

How much is the minimum repayment?

How much your minimum repayment amount is will depend on your lender. Typically, it’s a certain percentage of your balance. For example, if you spend £1,000 on your credit card, and the minimum repayment is 5%, you will need to pay back at least £50.

The minimum payment can sometimes be stated as the greater of either:

  • a specific cash amount (like £5 or £10)
  • a percentage of your balance
  • a percentage of your balance plus interest.

This can be quite complicated to get your head around, so here’s an example of a common minimum repayment:

‘The greater of 2% of the balance plus interest, 3.5% of the balance or £10.’

'Greater of’ means whichever of the three values is biggest, is the one you’ll pay.

  • 2% of the balance plus interest - means you’ll pay 2% of your entire credit card balance in addition to any interest
  • 3.5% of the balance - means you’ll pay this percentage of your existing balance
  • £10 (or any cash sum) - means this is the amount you’ll pay as a minimum if it’s larger than the other two options

If your minimum payment is given as a ‘greater of’ option, you’ll pay whichever amount is largest. You should be able to find out what your minimum payment is on your statement.

Should I make the minimum repayment?

Ideally, you should try to clear as much of your credit card balance as possible each month. Credit card providers charge interest on the remainder of your balance, so the more you pay off each month, the less you’ll have to pay in interest. If you clear your balance in full each month, you generally won’t pay any interest.

If you only pay the minimum each month, the rest of your balance will continue to build interest.

Even if you stop spending on this credit card, continuing to pay no more than the minimum means it could take years to clear your balance. The minimum repayment amount will get less and less each month, and interest continues to build.

If you continue to spend on your credit card, it’ll take you even longer to clear the balance only making the minimum repayments.

Is only making the minimum repayment okay?

It’s always best to pay off the full balance, or as much as you can, but if needs be it is fine to make the minimum payment – this won’t have a detrimental impact on your credit score.

You may decide to make the minimum repayment amount on months where other expenses have got in the way – like your boiler breaking down or you have another debt to pay off with a higher interest rate.

Improve your credit rating with Ocean Finance

  • Up to £1,500 credit limit
  • Quickcheck won't impact your credit rating
  • Check your eligibility in 60 seconds
Check now

39.9% APR
Representative (variable)

Intelligent Lending Ltd (credit broker). Capital One is the exclusive lender.