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Minimum payment
Also called payment floor, minimum daily amount.
The smallest amount that must be paid in a period to stay current - on revolving credit a percentage of balance plus charges, and on some advances a floor below which reconciliation will not go.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
On a revolving facility or business card, the minimum payment is a formula: accrued interest and fees plus a small slice of principal, or a stated percentage of the balance, whichever is greater. Paying it keeps the account current and does very little else. The balance amortizes slowly, and most of each payment is cost.
On advances the term means something quite different and considerably more important. Some agreements that offer reconciliation also set a minimum daily or weekly amount below which the payment will not be reduced no matter what receipts do. That floor, not the percentage language above it, is the real payment obligation. A merchant reading "you only ever pay a percentage of what comes in" and skipping the floor clause has misread the contract.
Floors appear under several names - minimum remittance, payment floor, adjusted minimum - and are sometimes buried in the reconciliation section rather than the payment section.
Where this one catches people
On an advance, a minimum payment floor caps how far reconciliation can help you, which means the downside protection is capped exactly where you need it most. Find the floor before assuming the percentage language protects a bad month.
Worked through
Illustration. A card balance of $20,000 with a minimum of interest plus 1% of principal. At 22% annual interest, the first payment is roughly $367 in interest plus $200 of principal - $567, of which under a third reduces what you owe. Paying only the minimum, the balance takes many years to clear.
Advance illustration. A daily debit of $600 against a specified 10% of receipts, with a $400 minimum. Receipts fall by half. Ten percent of actual receipts would be $300 a day, but the floor holds the payment at $400. Reconciliation delivers a third of the relief the percentage language implied.
Figures in the example are illustrative. They show the arithmetic, not a quote — what any one lender would charge is on that lender's page, where it is published at all.
Where you will meet this term
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Minimum payment — common questions
What does minimum payment mean?
The smallest amount that must be paid in a period to stay current - on revolving credit a percentage of balance plus charges, and on some advances a floor below which reconciliation will not go.
Where does minimum payment catch people out?
On an advance, a minimum payment floor caps how far reconciliation can help you, which means the downside protection is capped exactly where you need it most. Find the floor before assuming the percentage language protects a bad month.
Is minimum payment the same as an interest rate?
Minimum payment is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does minimum payment apply to?
Merchant Cash Advance, Working Capital, Business Line of Credit.
Is there a worked example of minimum payment?
Yes, on this page, and it is labelled illustrative. It shows the arithmetic, not a quote from any lender.
What else should I read alongside minimum payment?
Payment frequency, Percentage of receivables, Reconciliation clause, Remittance, Revolving credit.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.