On every credit card statement, you’ll see both the closing balance and a “minimum payment” amount. While the closing balance is everything you owe, the minimum repayment indicates the amount you need to pay off before the due date in order to keep your account in good standing.
Paying only the minimum repayment each month may help you avoid a late payment penalty, but this approach can cost you money in the long run. Let’s take a look.
A credit card minimum payment is as its name suggests – a minimum payment you must make towards your credit card balance each month. Essentially, it’s the least you must pay to avoid a late charge or fee.
Your bank or provider will work out the minimum sum based on your overall account debt and your card’s interest rate. When your credit card issuer sends you a bill every month, it’ll display your balance due (including all the purchases you’ve made within the month) and the minimum amount that needs to be paid for the month.
The minimum payment rate varies from lender to lender, but it’s typically 1–3% of your closing balance, with a minimum dollar charge of around S$20 to S$50.
There are two basic forms of interest, simple and compound, and credit cards accrue compound interest. There are also two parts to a credit card balance, the principal balance and the interest charges. Simple interest is charged as a fixed percentage on only the principal balance, so as you pay it down, regardless of how much you pay, you will pay less interest in the subsequent period. This assumes you are not making any new purchases to add to the principal balance.
Compound interest is charged as a fixed percentage on both the principal balance and the existing interest charges, so as you pay it down, if you’re paying too little, you can end up paying more interest in the subsequent period. This is why it is important to pay off as much of your statement balance before its due date as possible, to avoid paying interest on interest. Our guide explains more about how interest rates work.
How much will my minimum repayment be if I spend S$1,000 each month?
Let’s assume you have a credit limit of S$5,000. If you charge S$1,000 to your card, your minimum payment due would be S$50 instead of 3% ($30). However, if you charge S$2,000 to your card, you’ll need to repay at least S$60 (3%).
In Singapore, most banks set their minimum repayment sum at 3% of the outstanding amount or S$50, whichever is higher. The minimum repayment rate will be stated in the card’s terms and conditions, so make sure to look it up before applying for any credit card.
Here are the minimum monthly repayment requirements of some popular credit card issuers in Singapore:
|Card Issuer||Minimum payment formula (Including any fees and amount that is overdue and/or exceeds your credit limit)>||Minimum dollar charge payment|
|American Express||3% of the closing balance or S$50, whichever is higher||$50|
|DBS/POSB||2.5%-3% of the closing balance or S$50, whichever is higher||$50|
|OCBC||3% of the closing balance or S$50, whichever is higher||$50|
|HSBC||3% of the closing balance or S$50, whichever is higher||$50|
|UOB||3% of the closing balance or S$50, whichever is higher||$50|
|CIMB||3% of the closing balance or S$50, whichever is higher||$50|
|Maybank||3% of the closing balance or S$20, whichever is higher||$20|
|Citibank||1% of the closing balance or S$50 whichever is higher||$50|
|Standard Chartered||1% of the closing balance or S$50, whichever is higher||$50|
Use the calculator below to determine how long it will take you to pay off your debt based on how much you’re currently paying and how much you’d need to pay each month to meet your financial goal.
* Disclaimer: Whilst every effort has been made to ensure the accuracy of this calculator, the results should be used as an indication only. They are neither an offer nor a pre-approval for a credit card.
Take the example above. If you only repay S$50 each month, the remaining balance of S$950 will begin to incur compounding interest. Keep on charging S$1,000 to your card every month while only making S$50 repayment, you’ll find yourself exceeding your credit limit in five months.
Making only the minimum repayment each month is a highly dangerous practice that you should avoid at all costs. Here are the series of negative consequences that you could face if you only make the minimum credit card repayment each month:
- Incurs exorbitant compounding interest. Paying only the minimum monthly requirement on your credit card bill could potentially cost you hundreds or thousands of dollars in compounding interest.
- Long term debt. Leaving your outstanding debts unpaid, along with incurred interest, can cause you to carry a balance for several years.
- Negatively impact your credit score. Continually carrying your outstanding balance over carries the potential risk of maxing out your credit limit and increasing your overall credit utilisation, which can negatively impact your credit score.
So instead of merely paying the minimum amount due, always strive to either pay off the complete outstanding amount or try to clear as much of the debt each month to decrease the value of the compounded interest rate.
If you’re struggling to settle your credit card debt due to compounding interest or unforeseen challenges in life, contact your bank and inform them of your situation as soon as possible. There are instances where your bank can help you work out a payment alternative or restructure your total debt. You may also consider contacting debt management organisations such as Credit Counseling Singapore to help manage your debt better.
Consolidate your credit card debts with a 0% interest balance transfer facility
Another option you can consider to organise and pay down your credit card debts is by consolidating them with a 0% interest balance transfers facility. This means you can repay your debt without paying any interest for a promotional period (usually between 6 to 12 months) before the revert interest rate applies to your debt.
The best way to avoid incurring hefty interest charges is to always pay the entire amount, or as much as you can, before the statement due date. You should also be aware that apart from the credit card interest charges, there are various other fees such as annual fees, late payment charges, foreign currency transactions fees etc. These fees can also easily add up and balloon your overall credit card debt.
Should I use a credit card payment calculator?
It’s up to you, but a credit card payment calculator can help you determine how long it will take you and how much it will cost you to repay your current credit card debt. If you’re struggling to repay your debt or need to create a budget plan to pay down your credit card, you could find a credit card payment calculator useful.
What happens if I fail to make even the minimum monthly payment before the due date?
You will usually be charged a late payment fee. Missing the minimum monthly payment will also leave a negative mark on your credit file, which could impact your likelihood of receiving approval for other loans in the future. If you fail to pay the minimum amount, your debt will also continue to grow with interest (making it potentially even more difficult to pay off in the future).
Where can I find out how much my minimum repayment is?
Your minimum repayment amount will be included in your monthly credit card statement. However, you can also see the card reviews on Finder Singapore or read your card’s terms and conditions to confirm how the exact minimum repayment amount is computed.
Will I still be charged interest if I make the minimum repayment?
Yes, interest charges will still apply to the outstanding balance that you’ve yet to pay off. So if your minimum repayment is 3%, you’ll incur interest on the remaining 97% of your balance.
Is there anything I can do to reduce the interest charged on my debt?
Yes, here are a few options you can consider depending on your circumstances:
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- If you have existing credit card debt. You may wish to move it to a new balance transfer facility that offers an introductory low or 0% interest rate.
- If you often carry a balance. Switching to a card with a low ongoing interest rate could help you save on interest charges when compared to cards with higher interest rates. But it would still be ideal to pay more than the minimum and avoid carrying a balance whenever possible.