The credit card minimum payment amount due also includes any EMI payment conversions you may have opted for. If you have an unpaid balance from the previous credit card billing cycle or exceed your credit limit, that amount is also added to the credit card minimum due.
How does the minimum due on a credit card work?
The credit card minimum due is the smallest payment a cardholder can make to meet their monthly obligation. It's usually a percentage of the total outstanding balance or a fixed amount set by the credit card issuer. Paying only the minimum due allows cardholders to avoid late fees, but it results in carrying forward the remaining balance to the next billing cycle, incurring high-interest rates.
How to calculate the minimum amount due on your credit card?
The minimum amount due is usually set at 5% of the total outstanding balance, which is calculated on the date the statement is generated by most credit card issuers. This is the amount that you are required to pay before or on the due date of the payment.
For instance, your credit card company generates a credit card statementon the 26th of every month and the due date is on the 5th of every month.
So, if you have made purchases worth Rs. 10,000 before the 26th, your minimum amount due will be 5% of the total payable amount (Rs. 10,000) i.e., Rs. 500. You have to pay this amount on or before the 5th of the next month to avoid late fees.
If you pay the minimum due of Rs. 500, you will not be charged any late fee. However, the remaining outstanding amount of Rs. 9,500 will continue to attract interest at 3.99% per month.
Date of transaction | Amount (Rs.) | Comments |
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July 20 | 5,000 | No interest or late fee is applicable. |
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July 25 | 5,000 | No interest or late fee is applicable. |
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July 26 | 10,000 | Your credit card statement is generated for Rs. 10,000. The minimum amount due is Rs. 500. |
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August 5 | 500 | The minimum amount due is paid. The outstanding amount of Rs. 9,500 will incur interest at 3.99%. |
Benefits of paying the minimum due amount
- Helps you avoid a penalty and a late payment fee
- Helps you keep your credit card account active
- Lets you keep your credit score unaffected
- If you are in a financial crisis, you can use the card and manage your finances
Risk of paying only the minimum due amount
Credit cards apply interest on your outstanding balance every month. So if you pay only the minimum amount, your outstanding balance will remain high. The interest on the outstanding balance will accumulate month on month, making your debts higher. If you have the funds, it is better to clear thecredit card bill payment in full every month.
Conclusion
In summary, while paying the minimum amount due can help you avoid late fees and penalties, it is not advisable to do so unless you have no other option. Instead, it is better to pay the total amount due or as much as you can afford to avoid accumulating excessive interest charges and harming your credit score.
FAQs
Typically, the minimum amount due is calculated as 5% of the total outstanding amount. The credit card minimum payment amount due also includes any EMI payment conversions you may have opted for.
What is the minimum amount due in credit card payment? ›
Calculation of Minimum Amount Due
As is the case with many credit card companies, the Minimum Amount Due is generally 5% of the balance outstanding as calculated on statement date.
What is minimum credit card payment amount? ›
Your credit card's minimum payment is based on your interest rate and current balance and can fluctuate month to month based on how your balance changes. A minimum payment is the lowest amount your credit card issuer will accept as payment toward your balance each month.
How much is the minimum balance on a credit card? ›
How your minimum payment is calculated. Minimum payments are calculated differently bank by bank, but most commonly a “floor” is set, usually $25 or $35, which is the lowest minimum payment you'll be charged. However, if your statement balance is less than the floor, your minimum payment will be the total balance.
What happens if we pay the minimum due on an RBL credit card? ›
A. Yes, if you pay the Minimum Amount Due (MAD), you will be exempted from the late payment charges but you have to pay the finance charges on the remaining outstanding balance. Therefore, it is advisable to pay the credit card bill in full and on time to protect yourself from high interest charges.
What's the minimum payment on a $500 credit card? ›
Percentage method: Some credit card issuers calculate the minimum payment as a percentage of your outstanding balance. This percentage typically falls within the range of 1% to 3% but can vary. For example, if your outstanding balance is $500 and the minimum payment percentage is 2%, your minimum payment would be $10.
Does paying minimum due affect credit score? ›
Paying minimum due affects credit score and can lead to higher interest charges over time. The remaining balance accumulates interest, increasing the total repayment amount significantly.
What is the minimum payment on a credit card with a $2000 balance? ›
Minimum Payment on a $2,000 Credit Card Balance by Issuer
| Issuer | Standard Minimum Payment |
|---|
| American Express | $35 |
| Bank of America | $35 |
| Barclays | $25-29 |
| Capital One | $25 |
6 more rowsOct 19, 2021
You may have heard about something called the “15/3 rule” online and how it can help your credit. Essentially, this rule states you should make half of your credit card payment 15 days before your due date, then make the other half of your payment three days before your bill is due.
Will my credit score go down if I only pay the minimum? ›
Minimum payments themselves may not affect your credit score. But paying the minimum due on credit cards can lead to utilization problems.
If you only make minimum payments, a $10,000 credit card balance will cost you $16,056.59 in interest and take 346 months to pay off. Minimum payments on a $10,000 balance would start at $267 and decrease as you paid down what you owe.
How do I avoid paying interest on my credit card? ›
4 ways to avoid credit card interest
- Pay your credit card bill in full each billing cycle. ...
- Use budgeting apps to track spending and avoid costly debt. ...
- Consolidate debt with a balance transfer credit card. ...
- Consider a 0% APR credit card for purchases. ...
- Tap into savings to pay down credit card debt.
It's a good idea to pay off your credit card balance in full whenever you're able. Carrying a monthly credit card balance can cost you in interest and increase your credit utilization rate, which is one factor used to calculate your credit scores.
What is the minimum amount of credit card payment? ›
The credit card minimum amount due is the amount that a cardholder is required to pay on or before the payment due date. Typically, the minimum amount due is calculated as 5% of the total outstanding amount. The credit card minimum payment amount due also includes any EMI payment conversions you may have opted for.
What is the interest rate of a Bajaj credit card? ›
Interest Rate on the Bajaj Finserv RBL Bank Credit Cards
| Credit Cards | Interest Rates |
|---|
| Bajaj Finserv RBL Bank Binge SuperCard | 12.5% |
| Bajaj Finserv RBL Bank Binge SuperCard - First Year Free | 12.5% |
| Bajaj Finserv RBL Bank Platinum Choice SuperCard | 12.5% |
| Bajaj Finserv RBL Bank Platinum Choice SuperCard - First Year Free | 12.5% |
2 more rowsA: Paying only the minimum amount due leads to prolonged debt due to accumulated interest and a higher credit utilisation ratio and can result in paying significantly more over time due to interest and fees.
What is the minimum payment on a $3000 credit card Chase? ›
Minimum Payment on a $3,000 Credit Card Balance by Issuer
| Issuer | Standard Minimum Payment |
|---|
| Chase | $35 |
| Citibank | $45 |
| Credit One | $150 |
| USAA | $30 |
6 more rowsOct 19, 2021
Paying only the minimum amount means: it takes you longer to pay off your balance. you pay more interest.
What is the minimum payment due on a credit card statement? ›
Minimum Payment Due
Your minimum payment is the amount that you must pay each month to stay current with your credit card bill. The formula is in your original credit card contract and is a percentage (often 2 to 5 per cent) of your total balance.
What happens if you only pay half of your credit card bill? ›
Though partial payments can help reduce the interest accrual on your debt, lenders typically don't count them as on-time payments and may still consider your account in default.
