What is the Minimum Due on Credit Card?

‘Minimum due on credit card’ is the minimum amount you must pay by the due date to keep the account in good condition. The minimum due amount is usually a very small portion of the total amount of the credit card bill, usually ranging from 5% to 10%.

Calculating the Minimum Due in Credit Card

To calculate the minimum due on your credit card, you need to look at your monthly billing statement. The issuer checks the minimum due for a credit card by using a specified formula that considers the previous balance, new charges, handling fees, and any other fees you may be liable for.

Importance of Paying the Minimum Amount Due on Credit Card

Are you wondering, ‘What if I pay minimum amount in credit card’? Here are the pros and cons of it- 

• Helps Avoid Late Payment Fees

It is advisable to pay at least the minimum due amount before the specified due date to avoid penalties and late payment charges. These charges may depend on the remaining balance and, if not erased, considerably contribute to your expenses.

• Preserves Credit Score

Payment of the minimum amount enables you to avoid late payments, which is essential in credit reports. Hence, if you need loans or credit lines in the future, you might face challenges if you don’t pay the minimum due amount.

• Prevents High-Interest Charges

Paying only the minimum due implies that the remaining balance is rolled over to the next billing cycle, hence leading to the accumulation of interest charges. You will have to pay a high interest, and you might be stuck in a cycle of debt. Hence, you should clear the total due amount as early as possible.

Understanding the Credit Card Billing Cycle

Understanding the credit card billing cycle is crucial. This cycle typically spans 30 days, from the last statement date to the current one. All expenditures during this period are tallied, and a statement is generated at the end. 

This statement details the total outstanding balance, new charges, minimum payment due, and due date. After the statement is issued, cardholders usually have 15-20 days to pay the balance or at least the minimum amount due.

Tips to Avoid Late Payment Fees

Here are some tips that will help you avoid late payment and, hence, any kind of penalty:

• Set Up Payment Reminders 

Use emails or notifications, for instance, on your mobile phone, to remind yourself of the due date of your credit card payment. 

• Automate Your Payments 

Autopay allows you to set up automatic payments to your credit card, covering either the minimum amount due or the outstanding balance. This feature ensures you never miss a payment and avoid penalties.

• Choose the ECS Facility 

Opt for the ECS facility offered by credit card issuers to improve your credit card usage. With ECS, your bill payments are directly debited from your linked bank account on the due date, and you'll receive SMS and email notifications.

• Monitor Spending Patterns 

Spend wisely to stay within your credit limit and ensure you have enough funds in your bank account to cover your credit card debt. Also, budgeting will help you predict future expenses.

Understanding the concept of the minimum amount due on a credit card is crucial for maintaining your financial health. If you are faced with a financial emergency on a certain month, consider paying at least the minimum amount to avoid attracting penalties.

However, it is better to clear the entire remaining amount so as to have no balance to attract the payment of interest charges and other related fees.