Minimum finance charge.
In plain English
A minimum finance charge is a floor on the interest a credit card will bill in a cycle where you carry a balance. If the interest calculated from your rate and balance comes out below a set amount, often around one dollar, the issuer charges that minimum instead. It rarely matters on large balances, where the calculated interest far exceeds the floor, but on a tiny leftover balance it means you can be charged more than the math implies. It is one of several small fees disclosed in a card agreement that add up for people who carry small balances.
01Why it matters
On a small carried balance, the minimum finance charge can cost more than the actual interest, so it is a reminder that carrying any balance triggers a real, sometimes disproportionate, cost.
02The math, step by step
You carry a 15 dollar balance and the interest works out to about 30 cents. With a 1 dollar minimum finance charge, the issuer bills you 1 dollar instead, more than triple the calculated interest.
03What this is NOT
A minimum finance charge is NOT a late fee. It is a floor on interest for carrying a balance, charged even when you pay on time, whereas a late fee applies only when a payment is missed.
04Receipts
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Plain-English answers from our glossary. Receipts included. Never advice.
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