When you spend on a credit card, you’re borrowing the money from your credit card provider temporarily.
You must pay back what you borrow, but you have a certain amount of control over just how much you repay each month.
Despite this, there will always be a minimum amount you must repay every month. This is called your minimum payment.
This is the absolute minimum you can repay without getting into trouble.
Just how much your minimum payment is depends on your credit card provider.
Sometimes it’s a percentage of your balance, and other times it could be a set fee – perhaps £3 or £5 a month. It may be whichever is the largest out of a few different options.
Often you’ll have to clear the entire balance in full if it’s under a certain amount. For example, some credit cards might insist that you repay all of your spending if it’s less than £25.
You’ll be sent a statement every month – whether online or in the post – telling you how much you’ve spent and what your minimum payment for the month is.
It’s vital that you make at least this minimum payment. If you don’t, your credit history will be damaged and you might even be charged by your card provider.
While it’s important that you remember to make your minimum payment, it’s always better to aim to repay more than this. Because you’re charged interest on the cash you borrow, you’ll have to pay more if you carry a larger chunk of your deposit over to the following month.
Clearing your balance in full every month means you don’t have to pay a penny in interest.
To avoid missing your payment, you should set up a Direct Debit to make at least your minimum repayment every month. This takes the cash out of your bank account automatically, so you don’t have to worry about forgetting to make your payment one month.
Make sure you have the funds in your bank, though. If you don’t, the Direct Debit will fail and you could miss the payment.
Although you only have to make your minimum monthly payment, you should always aim to pay off more of your balance than this.
Just making the minimum payment each month means it could take many years for you to clear your balance completely. And, if you continue to spend on the credit card, it could take you even longer.
All this time, you’ll be paying more and more interest, rather than paying back what you initially borrowed.
Try to pay back as much as you possibly can each month, as this will save you cash in the end.
Disclaimer: We make every effort to ensure content is correct when published. Information on this website doesn't constitute financial advice, and we aren't responsible for the content of any external sites.
Helen is a personal finance editor who’s spent 11 years (and counting!) in the finance industry. She creates content on everything money with the goal of getting people thinking – and talking – about their finances in ways they may not have done before.
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