For many people, the amount of money their creditor asks for as a minimum payment is a mystery, changing occasionally but for an unforeseen reason. Each credit card company actually has its own way to calculate a minimum payment on your account, although they are all required by law to set a minimum payment that will allow the customer to pay at least some principle, eventually paying off their debt completely.

When the economy turns bad, the minimum required payment becomes more important for many consumers than in the past. Usually about 5% of cardholders pay just the minimum due on their account, although this percentage grows rapidly during tough times. Delinquencies on credit card accounts become more common, particularly when the minimum due is suddenly hard to make.

While many individuals feel sometimes that a lower minimum due would be a good thing, this is far from the truth. In 2003, federal regulators stepped in because minimum monthly payments had gone so low that cardholders found themselves with debt that just kept growing, despite making no charges. This is called negative amortization.

What is negative amortization? It’s when your minimum monthly payment is actually less than the interest charged to you monthly and it basically ends up adding to your debt, not decreasing it. Here’s an example of just how harmful negative amortization can be. Assume you have a credit card with a $4,000 balance. Your minimum due is $20 so you send in your payment. Next month you receive your statement and see that the amount of interest charged to the account for the month is $75. Your balance is now $4,055. You pay your minimum $20 again and next month your balance has climbed to $4,110.

Federal regulators changed the rules and set a new standard, forcing minimum payments to “amortize the current balance over a reasonable period of time.” No specific formula was set, although this is what forced credit card companies to make sure your minimum payment is at least somewhat higher than the month’s accrued interest.
Here’s a helpful guide to today’s top credit card issuers and their minimum payment calculation policies.

  • Bank of America: 1% of the balance, along with finance charges and late fees.
  • Chase: The greater of the following is due each month: 2% of the balance or 1% plus any interest and fees.
  • American Express: American Express has a number of calcuations they use depending on the credit card, although it’s usually 2% of the balance.
  • Citi: All past fees and finance charges are due, plus anything over the credit limit, along with the greater of the following: the new balance is under $20; $20 if the balance is at least $20; 1% of the new balance plus fees and finance charges; or 1.5% of the new balance
  • Capital One: The full balance is due if under $15, otherwise 1% of the balance plus finance charges, past due ffees and 1/12 of the membership fee.
  • Wells Fargo: If your balance is under $15, the entire balance is due. Otherwise, 1% of the new balance plus finance charges and fees.
  • Discover: 2% of your balance is your minimum due, or a minimum of $15 plus finance charges and fees.
  • USAA:  The full balance is due if under $15; 1% of the balance, plus finance charges and fees, not to be under $15.
  • US Bank: According to US Bank, the minimum payment is calculated using the greater of the following: 1% of the balance, plus finance charges and fees; or a minimum of $10.

As you can see, minimum payment calculations vary amongst all credit card issuers, although all are similar and stick to around 1% of the balance, plus fees and finance charges. Understanding how your minimum due is calculated is a great way to see how to get yourself out of debt because you’ll understand how much of your payment is going to the principle and how long it will really take to pay off your balance using only minimum payments.