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 your credit card active. The minimum due amount is a small portion of the total credit card bill, usually between 5% and 10%.

Calculating the Minimum Due in Credit Card

Look at the monthly billing statement to know how to calculate the minimum due amount on your credit card. All credit card issuers use a formula that considers the following factors -

• Previous Balance

• New Charges

• Handling Fees

• Any Other Fees

Importance of Paying the Minimum Amount Due on a Credit Card

What happens if you pay the minimum amount on your credit card? Here are the pros and cons of it- 

• Helps Avoid Late Payment Fees

Paying the minimum due amount before the specified date helps avoid penalties and late payment charges. These charges may depend on the remaining balance and, if not erased, will considerably contribute to your expenses.

• Preserves Credit Score

When you pay the minimum amount, you avoid late fees, and that improves your credit report. Hence, if you need loans or credit lines in the future, you might face challenges if you don’t pay the minimum due amount.

• Leads to High-Interest Charges

If you pay only the minimum due amount, the remaining balance is rolled over to the next billing cycle. This leads to an accumulation of interest, and you may get stuck in a cycle of debt. Thus, paying just the minimum amount every month is not a good financial move.

Understanding the Credit Card Billing Cycle

The billing cycle and date play an important role in managing your credit card. 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.

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.