What Is Minimum Amount Due On Credit Card? All You Need To Know

Credit cards are useful to meet several financial needs, especially when you are running out of cash. Even during emergencies, like an unexpected hospitalisation, credit cards could help pay medical bills. Though the credit cards have become essential financial instruments for many, especially for millennials and young professionals, the payment defaults are also on the rise in the last few years.

If you are not able to pay the entire outstanding amount on your credit card, paying the minimum due could be helpful to avoid late fees and a negative impact on your credit score.However, there are several other important factors to take into account if you are paying only the minimum due amount towards your credit card bills. You may eventually end up paying high interest charges.



Understanding the key factors associated with minimum due on your credit cards could be helpful in effective management of your personal finances.Two Ways To Get Out Of Credit Card DebtWhat Is Minimum Amount Due On Credit Card? The minimum amount due on a credit card is the lowest amount you need to pay by the due date to avoid late payment charges. The timely payment of minimum due also helps you maintain a healthy credit score.

How Credit Card Minimum Due Is Calculated?You can check your monthly billing statement to know the minimum amount due on your credit card. The exact method of calculation varies across banks and credit card issuers. It is usually calculated as a percentage of the total outstanding amount.

The payment percentage can vary from 2% to 5%.The banks and card issuers generally use the following formula to decide the minimum due amount: (Outstanding balance × Minimum payment percentage) + (Annual interest rate/12)Advantages Of Paying Minimum Due On Credit Card Here are some reasons why you must pay the minimum amount due on your credit card:No Late Payment Fees: When you don’t pay the minimum amount as per your credit card bill by the due date, you will be charged a late payment fee. Healthy Credit Score: Not paying your credit card dues on time negatively affects your credit score.

Any payment default on credit cards will reduce your credit score, which may make it difficult to get approval for new loans or other credit facilities.Easy Management Of Credit Card Account: If the credit card issuer takes notice of late payments of credit card dues, they can take measures such as lowering the credit limit or even closing the account. Paying the minimum amount due ensures no such action is taken by the card issuer.

Disadvantages Of Paying Minimum Due Paying the minimum due on credit cards may push you into a debt trap. The lenders impose an interest rate of up to 40-45% per annum on the outstanding balance. Any new transactions made using the card will also attract more interest, while increasing the total outstanding.

Paying the minimum due could be a temporary solution but it can lead to an unending debt cycle.To conclude, while paying the minimum amount due on your credit card ensures that you avoid late payment charges, it is important to clear your outstanding balance as much as possible. By doing so, you lower your debt to the maximum extent and avoid higher interest charges.

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