2 min read
Definition
A minimum payment is the smallest sum required each period on a revolving facility or business credit card to avoid arrears. It usually covers interest plus a small slice of principal.
In plain terms
Meeting the minimum keeps you in good standing, but if that is all you pay, the balance barely falls and interest keeps compounding against you.
Why it matters for your company
Persistently paying only the minimum is a sign a balance should be termed out into a cheaper term loan. Compare the cost with the overdraft vs loan cost calculator. See compound interest.
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