Your credit card’s minimum payment amount

Posted in Banking tips
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We’ve updated this article because the minimum monthly repayment we calculate will change from 1 April 2014.

Don’t fall into the trap of thinking that your minimum credit card payment amount is enough to avoid interest charges. Or thinking you’ll get your balance down to zero quickly if you keep paying the minimum every month. While only making a minimum payment can give you the flexibility to make purchases and could be useful for a short period until you can pay off your card balance, it is only the bare minimum you have to pay to meet the obligations of your credit card’s contract.

What making your total minimum payment does

Making the total minimum payment each month means you avoid a late payment fee and ensures you can keep using your card. The terms of your contract require you to pay this minimum amount, otherwise we can put a block on your card to stop you from using it. If you’re struggling to make the minimum payment, talk to us as soon as possible to see how we can help you.

What making your total minimum payment doesn’t do

Paying the minimum amount doesn’t stop us from charging you interest. If you only pay this amount you’ll be charged a month’s worth of interest calculated on your balance each day for that statement period. You will also lose your interest-free days for the next statement period, meaning interest charges will keep adding up.

And if you didn’t pay your balance in full last month, you could now be paying interest on interest. This could happen if, say, you’re away on holiday and you forgot to pay it in full.

Making the minimum payment also doesn’t help you pay off your credit card quickly. In fact, only paying the minimum amount each month means it could take you a really long time to pay it off. Even if you’ve reached your credit limit and stop using it for purchases, the interest keeps building so a minimum payment only reduces your debt a little.

Let’s say you have a credit card debt of $1,000 at an annual interest rate of 18%. If the minimum payment is set at 2% of the card balance and that’s all you pay each month, it will take you just over five years to pay it off, at a total cost of around $539 in interest. And that’s only if you don’t make any new purchases or cash advances on the card. It doesn’t include the annual fee, either.

But if you committed yourself to paying $100 on your card each month, it could only cost you $74 in interest and you’d have paid it off in 11 months.

While only making minimum payments can be useful for short periods to give you some flexibility, as you can see it is important to have a plan to reduce your balance. You might work out a savings plan to reduce it over several months or maybe you know that you will have some extra money coming in to pay off your whole balance at once, like tax time or when you get your bonus each year.

How we work out your monthly payment

We work out your monthly payment by looking at your closing balance on your card this month:

If your closing balance is… Your monthly payment amount is…
More than $1,250 2% of the amount you spent
$25–$1,250 $25
Less than $25 The whole amount of your balance

Then we need to work out your total minimum payment.

Monthly payment and total minimum payment – they could be different

Sometimes your monthly payment and total minimum payment will be the same amount, but there could be times when it’s different.

How we work out your total minimum payment

Overdue amounts: Anything that you didn’t repay towards your total minimum payment last month is overdue, so we add it to your monthly payment and it becomes part of your total minimum payment this month.

Overlimit amounts: If your card was over your credit limit at the end of your last statement, we add this amount to your total minimum payment. If your credit limit is $1,000 but your balance is $1,050, that’s an overlimit amount of $50.

If you are both overdue on your last payment and you are over your credit limit, we take the greater of the two amounts and add it to your monthly payment.

total minimum payments view

Let’s say your total minimum payment was $50 last month, but you only paid $40. You still owe $10. We’ll add this to your next total minimum payment. You’ll see it on your statement listed as “Past due/Overlimit amount”. (There’s also a $5 late payment fee for not paying the total minimum payment by the due date last month, which will be added to your closing balance this month.)

But if you also bought a new pair of sunglasses that pushed you over your card limit by $60, this would be greater than the $10 you have overdue. In that case $60 will show as your “Past due/Overlimit amount”, and be added to your minimum payment, instead.

So the $60 shown in this example (in Past due/overlimit amount) is added to the $25 monthly payment to equal your payment – now $85.

Any overdue/overlimit amount is due immediately. You need to pay your total minimum payment amount by the due date to avoid paying a late fee.

Whenever you can, pay your balance in full

Take a look at your statement. As well as the total minimum payment amount, there’s a “closing balance” amount. The closing balance is the total amount you owe for that statement period – including your purchases and any interest charges.

credit card details view

If you pay your closing balance in full by the payment date, not only does it save you interest charges on the purchases you made that month, it gives you interest-free days for purchases you make in the next month.

Read about how your interest free days work to avoid paying purchase interest.

If paying your closing balance in full isn’t possible, read our next blog post about making part payments to your credit card.

 

Did you find this article helpful?

If there’s anything else you’d like to know, leave us a comment below and we’ll reply as soon as we can.

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Comments

61 Responses to Your credit card’s minimum payment amount

  1. Ozzy says:

    If you pay off your credit full and you dont owe money on it at all for the next month do you still pay interest. Even if your credit card is debt free. Thankyou

  2. Tracie says:

    Very informative

  3. Frank James says:

    I’m wanting to make a online purchases of $800 how much would my min monthly repayment be??

    Kind regards
    Frank

    • NAB says:

      It depends on your credit card balance, Frank – if you spent $800.00, the minimum payment is calculated at 2.5% of your balance ^LB

  4. Tamara says:

    If I maxed out my credit card to $20,000 what would the minimum monthly repayment be?
    Thanks
    Tamara

  5. Aaron says:

    If your card is put on hold due to not paying the minimun repayment. (overseas n forgot) how long will it take after you have made a payment before the card is active again?

    • NAB says:

      Hi Aaron, if you have fallen behind in your repayments you need to contact our Collections department for the block to be removed. Once you have spoken to the team and made the required payment, the block should take 2 business days to come off. For any queries, you can contact them on +61 3 9322 7000. They are available Monday – Friday 8.00am till 8.00pm and Saturday 9.00am till 1.00pm AEST. Alternatively if you require a call back, please email through your contact details to social.media@nab.com.au and I’ll get the team in touch with you ^DH

  6. Michael says:

    What is my minimum payment if I balance transfer $9500 and the interest rate is 0%?

    • NAB says:

      Hi Michael,

      your minimum monthly payment on your credit card is currently calculated at 2.5% of the closing balance of your statement.

      For example, if your closing balance is $9500, your minimum payment would be $237.50 ^SN

  7. Christine says:

    I have a question durning the month I put on $300 on the credit card at the end of that month telling me how much I need to pay eg $186.51 now durning that month with the $300 am spending it dose that mean I still need to put on $186.51 on the credit card

    • NAB says:

      Hi Christine,

      Any deposits that you make into your credit card during your statement period will be of benefit as it reduces your running balance.

      At the end of your billing month your statement will print and it will include a closing balance, a required payment and a due date.

      If you want to avoid purchase interest on your credit card, you need to pay the full closing balance on your credit card statement each month by the due date.

      If you’re not able to pay the full closing balance, that’s fine, your account will remain in order; you will simply incur interest on your purchases. You still need to make the required payment by the dye date however, if you want to avoid paying late payment fees and/or your account possibly falling into arrears.

      You might finds this information useful ^SN

  8. Christine says:

    Thank you

  9. lauren. clowdus says:

    If my balance is 2040.00 and I am over limit by 40 cuz I went a couple dollars over and got charged 40 interest now my minimum payment is 61.00 what will be my minimum payment after I pay that?

    • NAB says:

      Hi Lauren,

      You will not be charged purchase interest on your NAB credit card if the full closing balance of your previous and current credit card statement is paid in full by the due date.

      If you pay your minimum repayment, your account will remain in order but you’ll be charged purchase interest.

      If the ‘required’ payment is different to the ‘minimum’ payment on your credit card statement, you’ll need to make sure you pay the ‘required’ payment amount.

      Hope this helps ^SN

  10. adity says:

    hi,
    if my total balance is 32000,if i pay only the minimum amount which is 2000 and start shopping again and now its 42000 ,now what is the minimum amount of my credit card

    • NAB says:

      Hi adity, the minimum payment is 2% of the closing balance on the statement (or $25, whichever is greater) plus any overdue or overlimit amounts. ^RM

  11. Dave says:

    I paid my balance, in full, a day before the due date. However in my next statement I have a late payment fee. This is now the third time that this has happened. How is this firstly possible, and secondly, how is it lawful?

    • NAB says:

      Hi Dave, this does not sound right – I recommend contacting us on 13 66 22 from 8am-7pm Mon-Fri, or 9am-6pm on weekends (AEST/AEDT). If you’re overseas, the number to call is +61 3 8641 9083. Alternatively, you can send through a Secure Message on Internet Banking in regards to this issue and the team will investigate – here’s how to use this channel:http://nab.co/1calOlw ^DH

  12. Steve says:

    If you have a credit limit of 1000 and you transfer an additional 500 from your savings account onto the credit card to make a purchase of 1500 will any of that 500 count as a repayment and would the interest be calculated any differently?

    • NAB says:

      Hi Steve,

      If your credit card limit is $1,000.00, the extra $500.00 will put your account in credit by $500.00, provided you don’t have any other purchaces on your card at that time.

      Only payments made between the day your credit card statement prints and the due date are considered contractual repayments – ie. will ensure your account does not fall into arrears, if they make up at least the minimum payment due shown on your credit card statement.

      Making payments into your credit card at any other time will bring your running balance down – which will then reduce your minimum repayment due, as this is calculated as a percentage of the closing credit card balance ^SN

  13. Nelina says:

    Hello, on my credit card statement the new balance that I should pay is $75.00, but when I go online and look at my card transaction the full amount is less than $ 75, cause I have already paid off part of what I owe, so my question is, before due date I should pay 75.00 or the actual amount that I owe at that moment, cause its less than on the statement?

    • NAB says:

      Hi Nelina, if you’ve made a payment before the due date but after the statement was printed, you would only need to pay $75 minus the amount that you’ve already paid. If you’ve made the payment before the statement was printed, this payment will have contributed to your balance as shown on your statement, hence you would still need to pay off the $75. If you are still confused, feel free to email us at social.media@nab.com.au or call us on 13 22 65 (or +61 3 8641 9083 if overseas) from 8am-7pm Mon-Fri, or 9am-6pm on weekends (AEST/AEDT) ^DH

  14. Hannah says:

    Can you apply for a bank loan if you have a credit card with an owing balance ?

    • NAB says:

      You certainly can Sarah – however, please be aware that any debts that you currently have will weigh in the decision made on your application as we aim at providing responsible lending. If you need further information, feel free to email us at social.media@nab.com.au or call us on 13 22 65 from 8am-7pm Mon-Fri, or 9am-6pm on weekends (AEST/AEDT). If you’re overseas, the number to call is +61 3 8641 9083 ^DH

  15. Elba says:

    Hi I have a question I just got approved for a credit card for 300 n I really don’t know how to use it or how should I spend the 300 in bills n then pay it back I don’t know please help

    • NAB says:

      Hi Elba,

      I’d suggest you start by having a read of our ‘Manage your credit card’ articles – they’d make a great starting point.

      In short, your credit card will print a statement each month. It is important that you make your payment by the due date on your credit card statement. You can make either a full closing balance payment or a minimum payment.

      If you pay your full closing credit card statement balance each month, you’ll be taking full advantage of your interest free period on your purchases.
      If you pay only the minimum repayment required by the due date, your credit card account will be in order, however you will be charged interest on your purchases.
      If you were to not make any repayments by the due date, you’d find your account would probably fall into arrears and possibly blocked until a payment is received.

      It is important to note that only payments made into your credit card account between the day the statement prints and the due date on it will count toward your required monthly repayment. Any repayments made outside this time will reduce your ongoing credit card account balance but will not contribute toward your credit card financial obligations ^SN

  16. Sabrina says:

    Hi There!
    A bit of a noob when it comes to credit cards so your up is really appreciated!
    So I got my bank statement on the 23rd of last month saying I need to make the minimum payment of $25 on my closing balance of $58. I paid whatever I’m owing in full before the due date of the 17th HOWEVER I did dip in to the credit card again after to make additional purchases. So my question is, will my closing balance for this month be just whatever I spent after I paid the card in full or will it include the $58 too? Does the fact that I still have money owing after the due date mean I’ll incur additional charges or not get my 55 day interest free?

    Thanks!

    • NAB says:

      Hi Sabrina, as long as you pay the full closing balance on your statement by the due date you won’t incur an interest charge and you will still have your interest free period. Any purchases made after your statement date will appear on the next statement you receive. For example if you paid off the closing balance of $58 and then made $100 of purchases, the next statement will show the $100 of purchases – hope this information helps! ^TC

  17. Aleisha says:

    How does man calculate if I have paid the balance in full if I am paying it off in huge bits, before the payment is due. My statement ended on the 9th. With a closing balance I must pay in full by the 23. However I have made some purchases after the closing date. And also paid off some of the closing balance however that total doesn’t lower so how do I know if I have made the closing balance payment in full? These purchases I have made after the closing balance wil appear on my next statement? Not this one? Also with interest is it 20 percent of the amount each day? So let’s say I owed 1000 it would go to 1250 on the first day. And keep growing each day there after? If the credit card is it at around 20? I’m so confused thanks

    • NAB says:

      Hi Aleisha, the best thing would be to record what payments you have made or use the filter search feature on internet banking to show you only payments onto the card – any purchases made after the statement has been issued will appear on your next statement. In regards to interest, if your interest rate is 20% p.a. this is a yearly rate – you would need to work out the daily rate to be able to roughly calculate how much interest is charged. If you want to talk in detail with someone don’t hesitate to give our card specialists a call on 13 22 65 to clarify things for you ^TC

  18. margaret florance says:

    Dont understand all the things about credit card my question is if you pay all you owe on your card in full by due date when can you start using that card again thanks

    • NAB says:

      Hi Margaret, once your statement is issued any transaction after this will appear on your next statement so you are able to use your card at any time – just ensure you pay the full closing balance listed on your statement to avoid any interest charges ^TC

  19. emma says:

    HI if i pay balance in full every month by due date can i then spend on it again before statement and still pay no intetest?

    • NAB says:

      Hi Emma, you will not incur interest on your credit card, if the full closing balance is paid in full by the due date- If you did not pay the closing balance on your previous statement in full by the payment due date, your current statement will include interest charges for the outstanding balance, as well as any new transactions made since the closing date on that statement ^NJ

  20. Katie says:

    What happens if I do not pay my minimum payment each month but pay the interest only?

    • NAB says:

      Hi Katie, if you don’t pay at least the minimum monthly payment you will be charged a late fee each time and also risk the card falling into collections due to the account being in arrears ^TC

  21. james says:

    If I do a cash advance of $2000 and pay in full in within the next month what charges will i receive.

    • NAB says:

      Hi James, you will be charged a cash advance fee which amounts to 1.75% p.a. (subject to change) of $2000 and an interest rate of 21.74% p.a. (subject to change). Please note that the interest-free period does not apply to cash advances ^DH

  22. shaneeka says:

    Hi I really need an answer to this, if I open up a new credit card account with a apr of 23.90% and an annual membership fee of $75.00, and lets say I spend $50 as soon as I get my card, will I have to pay $125 the following month when I get my bill? Plus the interest?

    • NAB says:

      Hi Shaneeka,

      To avoid paying interest on purchases made on your credit card, you’ll need to pay the full closing balance on your credit card statement each month by the due date.

      In your example, if you’ve just received a new credit card account (with an annual fee of $75.00) and you only make an everyday $50.00 purchase, the closing balance on your credit card statement should be $125.00.

      If your new credit card has an interest free period (most credit cards do), and you pay the $125.00 by the due date on your credit card statement, you will not be charged any purchase interest ^SN

      • shaneeka says:

        Thank you for the reply, but my concern is, lets say I receive the new card tomorrow, and spend $50 on it, by the time my first bill comes, will I be obligated to pay $125 total or will there be a minimum balance due? And if there is about how much would it be? I am asking because I’m a credit card idiot and because I know for a fact that I wont be able to pay $125 next month, I honestly will only be able to pay about $30 a month. This is my concern. Thank you so much.

        • NAB says:

          Hi Shaneeka,

          Your credit card statement will have a closing balance – if you pay that in full by the due date each month, you will not be incurring any purchase interest.

          Your statement will also have a minimum payment due by the same due date. The minimum payment is always 2% of the closing balance, or $25, whichever is greater. You need to pay that amount each month by the dye date to make sure your card remains in working order. Failure to do this would most likely cause your card to fall into arrears.

          If there is ever a required payment amount, you’ll need to pay that instead by the due date as a required payment is generated by any overlimit and/or any past due amount added to the minimum payment amount.

          Hope this clarifies things ^SN

  23. rocky says:

    Hi there, I have a debt which went to debt collectors because of me not paying the repayments on time as I was overseas, now my question is can I use my ANZ credit card to pay that off, does it incur any cash advances or does it comes up as normal purchase, as the debt collector said I can pay it of using my credit card.
    Your help is much appreciated.

    • NAB says:

      Hi Rocky,

      If you’re dealing with a debt collector, you’d be best to trust the advise they give you in terms of paying your debt off, as they’re the ones receiving payment ^SN

  24. Angie says:

    Hi. I have a balance of $893 at the end of my statement period. It’s from purchases only and I started the statement period on a $0 balance. If I paid the minimum only ($25), what would the interest be which is 19.74% p/a. Are you able to share with me how you work the interest out? Many thanks, Angie

    • NAB says:

      Hi Angie, Interest for a statement period is calculated by applying the relevant daily percentage rate(s) (the account’s annual percentage rate/s divided by 365) to the total “aggregated balance” of the account for that period. The daily percentage rate(s) can be found on your card account statement.

      To obtain how your interest is calculated, please follow the formula below:

      Aggregated balance X Daily % rate (annual rate% divided by 365) = Monthly interest charge.

      This means that the aggregated balance includes purchase, cash advance and special balances, and any interest charges shown on a statement of account which are outstanding. Interest on each component (purchase, cash, and special) is calculated separately and then added together.

      More info here http://nab.co/1xLNZl0 ^LB

  25. face says:

    hi I have a question if I only pay my minimum balance will my credit limit restart

    • NAB says:

      Hi Face, I’m keen for more info – is your card blocked? If so, you will need to pay the required payment in order to unblock your card. ^LB

  26. Ariel says:

    Im needing some help. This is all new to me. I recently received my secured credit card in the mail. I have a $400 credit limit. Does the $400 limit start over monthly or do I have a full year to pay the $400 off. I dont understand.

  27. Katie says:

    Hey i need some help with information on my credit card. I have a credit card limit to 2,000 and i phoned my bank and said what is with this minimum fee of 13.00 dollars and they told me that’s if i am late on my credit card and I pay my bill amount on time. But it doesn’t sound right, Can you give me advice please?

    • NAB says:

      Hi Katie, I do need to look into your account to give you an exact answer – if you’re keen, please email me your contact details to social.media@nab.com.au and I’ll have the team call you back :) Alternatively you can reach us directly on 13 22 65 ^LB

  28. tony says:

    I owed $59.55 on the 28th of October and then this statement owe $60 on november.

    On 10th November i received a letter saying if i dont pay both amounts immediately I will be sued for all the balance.

    Thats 12 days overdue and the other amount isnt due for a other 18 days.

    Whats the go.?

  29. Jemma Van Den Broek says:

    If I have a credit card with 0% interest for the first 12 months do I have to pay the balance each month? Will I be charged interest if I don’t? What would my minimum repayment be if my limit is $1000?

    • NAB says:

      Hi Jemma,

      If your card was opened with the 0% pa on purchases for the first 12 months, you can only pay the minimum repayment each month to keep your account in order.

      Any further payments will still be reducing your ongoing credit card balance.

      The minimum payment on a credit card account is 2% of the closing balance or $25, whichever is greater.

      Hope this helps! ^SN

  30. Angela says:

    Hi , if i have a $500 credit limit and i used it and only have $300 left on my credit card and if i paid $100 the next day will my credit card reset back to $500 or do i need to pay off the full $200 for it to be back
    To $500 ? This is my first credit card and i just received it today and will be paying $100 to it tomorrow so im just wondering if it resets or not .. Thanks

    • NAB says:

      Hi Angela, in this case you will only have $400.00 credit – you do need to pay the full owing amount ($200) to have the limit back up to $500.00 ^LB

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