minimum amount due in credit card

What Is ‘Minimum Amount Due’?

When the credit card bill is sent to you every month by the credit card issuer, you are provided with two options to make the credit card bill payment on the credit card bill payment due date. Either you pay your total dues in full or pay the minimum amount due.

If you do not have any financial issues then you can pay your dues in full. But if you are facing cash crunch then you have another option to pay the minimum amount due.

You can continue the services of your credit card by paying the minimum due amount of a credit card bill. Through minimum due amount, credit card issuers facilitate the cardholder to utilize the services of their credit card by paying a portion of their total outstanding bill instead of paying the entire amount of their credit card bill. This partial amount that has to be paid to continue the credit card services is known as minimum due amount. You do not have to pay late fees if you pay the minimum due amount.

Thus “Minimum Amount Due on a Credit Card is the minimum amount that you are required to pay on the Payment Due Date, so that you can continue to use the services of your Credit Card.” Minimum Amount Due is 5% of your outstanding balance. % Happens till then.

How Is The Minimum Amount Due Calculated?

Generally, the minimum amount due for a credit card is calculated on the basis of 5% of your total outstanding balance. In this, any outstanding amount due from your previous statements is added to the current outstanding amount. Thereafter, the minimum amount payable is fixed at 5% of your total outstanding amount.

The following charges may also be added to the minimum amount payable by the user-

If you have converted any payment on your credit card into EMI, then that amount is also added to the minimum amount.
The outstanding amount from the previous billing cycle is also added to the minimum amount.

minimum amount due in credit card

Benefits Of Paying The Minimum Amount Due

Benefits of Paying the Minimum Amount Due are as follows-

  1. If you are not able to pay your credit card bill in full, you can keep your credit card services active by paying the minimum amount due.
  2. Credit information bureaus will not classify you as a defaulter if you pay your credit card minimum dues on time. This will keep your kidneys good.
  3. If you pay the minimum due amount of your credit card bill, then you will not have to pay any kind of late payment fee. Thus, you can avoid late payment fees on credit card bills by paying the minimum due amount.
  4. If you do not pay your credit card bill on time, your credit score is adversely affected. But if you pay the minimum due amount, you can protect your credit score from being adversely affected.

Disadvantages Of Paying Only The Minimum Due Amount

Disadvantages of Paying only Minimum Amount Due are as follows-

  1. If you pay only the minimum due amount instead of paying your credit card bill in full, the balance increases. Interest is charged on this amount which ranges between 30 to 50% on an annual basis. It is calculated on a daily basis on the outstanding amount. As the outstanding amount increases with time, the interest also increases which later puts a financial burden on you.
  2. Paying only the minimum due amount every month increases the minimum due amount for the next month as the 1st month’s balance is added to the next month’s amount to arrive at the minimum amount. In this way the minimum amount goes on increasing.
  3. If you pay only the minimum due amount instead of paying your credit card bill in full, you cannot avail the interest free credit period facility of the credit card. You have to pay your credit card bill in full every month to avail the interest free credit period.
  4. Paying only the minimum due amount on a credit card bill reduces your achievement credit limit to the extent you would not have made the payment. This reduces your available credit.

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