Business credit card minimum payment: How it’s calculated

When it comes to your business’s credit card bill, it can be a relief to know that you don’t have to pay your full balance every month. Your monthly statement will have a minimum payment, which is the lowest amount you’re allowed to pay. This can come in handy during months when finances are tight, but it can pose big challenges if used as a long-term strategy.

Read on to learn more about business credit card minimum payments, including how they’re calculated and what might happen if you miss one.

What you’ll learn:

• The minimum payment on a business credit card is the lowest amount you need to pay to stay in good standing with the card issuer.

• Minimum payments are calculated as either a flat-rate percentage of your balance or a percentage plus fees and interest.

• Missing a minimum payment could lead to late fees, a lower credit score or losing a promotional annual percentage rate (APR).

• Only paying the minimum can extend the time it takes to pay off the debt, impact your credit score and limit your flexibility to cover unexpected costs.

The minimum payment on a business credit card is the smallest amount you need to pay by the due date each month. As long as you make at least that payment, your account will stay current and in good standing with the credit card provider. 

That said, it’s a smart idea to pay more than the minimum amount due whenever you can. That’s because paying only the minimum can lead to interest piling up, which means you’ll need more time to pay off your balance—and your debt could keep growing over time. But making at least the monthly minimum payment still helps you maintain a good credit score. 

To better manage your monthly expenses, it helps to know what your minimum payment is and factor it into your budget. If you’re thinking about applying for a business credit card, be sure to review the terms and conditions, including the minimum payment requirement, the credit limit you’re approved for and more.

Also, keep in mind that some business credit cards—like those with premium rewards or no preset spending limit—need to be paid in full every month.

Typically, card issuers calculate the minimum payment on your business credit card in two ways. They may charge a flat percentage of your total balance, usually around 2%-4%. Or the issuer may charge a percentage of the balance plus any interest and fees that have built up during the billing cycle. You can check your card’s terms and conditions to find out exactly how your card issuer calculates the minimum payment.

Say your card issuer calculates the minimum payment using a flat percentage. If they charge 2% and your business credit card balance is $5,000, your minimum payment would be $100.

If they charge 4% of your total balance, your minimum payment increases to $200.

Some card issuers include interest, fees and any past-due amounts when calculating your minimum payment. In these cases, they often use a lower flat percentage—generally around 1%—but, because you’re also paying extra charges, you might end up with a higher payment compared to the flat percentage calculation.

To find the minimum payment for your business credit card, take a look at your monthly statement. You can check either the hard copy mailed to you or simply log in to your account online. 

You should see a box on the statement labeled “Minimum Payment Warning.” Since the Credit CARD Act of 2009 (CARD Act) was passed, credit card issuers are required to include this box. It breaks down how long it could take to pay off debt if you only make the minimum payment—and how much more you could pay in interest over time.

If you miss a minimum payment or pay less than the minimum amount due on your business credit card, a few things could happen:

• You could see your credit score decrease. The credit card issuer will report missed payments to the credit bureaus. And since payment history plays a key role in calculating your credit score, even one missed payment could have a big impact on your scores.

• You might get charged late fees or other penalty fees. Depending on your credit card’s terms and conditions, you might face late fees or a penalty APR. 

• You could lose a promotional APR. If your business credit card came with a special low interest rate when you opened the account, a missed payment could lead to the card issuer removing the promotional offer—and you’ll end up paying the regular rate on your balance.

This is why it’s so important to stay on top of your business credit card bills and make at least the minimum payment every month. Properly using your business credit card can be a great tool that helps you track expenses, earn valuable rewards, cover short-term expenses or large purchases, and maintain positive cash flow. By consistently paying on time, you can set your business up to ensure you can maximize those benefits.

While making the minimum payment helps you stay in good standing with your credit card issuer and avoid late fees or penalties, consistently paying only the minimum each month can have some downsides. Here’s what to watch out for:

• Accrued interest charges: Since interest keeps piling up on what you owe, you’ll end up paying a lot more in the long run—making each purchase more expensive overall.

• Slower debt repayment: Paying just the minimum only chips away at your balance, stretching out your payoff timeline—so it could take years to fully pay off your debt.

• Impact on your credit score: High balances and making only minimum payments can raise your credit utilization and affect your payment history—both key factors in calculating your credit score.

• Less available credit: Your credit limit doesn’t change, but with a high balance, you’ll have less available credit for new purchases. That can make it harder to cover unexpected business expenses.

Paying at least the minimum on your business credit card each month helps keep your account open and in good standing—and saves you from getting hit with late fees or a ding to your credit score. But whenever possible, aim to pay more than the minimum—this helps you avoid extra interest charges and get your balance paid off faster.

If you’re ready to open a credit card for your business, compare Capital One business credit cards today. You can even see if you’re pre-approved with no impact to your personal credit score.