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# What Is Minimum Amount Due In Credit Card?

## What is the Minimum Amount Due on a Credit Card

The minimum amount due on a credit card statement is the minimum amount on your credit card bill you must pay within the payment due date to enjoy credit card benefits and keep your card active. Generally, the minimum amount due on a credit card is an option you can use if you find it challenging to repay the entire bill.

Keep in mind that failure to clear your outstanding dues on time can lead to severe penalties, deactivation of the card, and harm to your credit score.However, the card issuing companies allow you to pay a small amount of your total outstanding amount, known as the minimum amount due, before the due date. This option will help you avoid penalties and keep your credit card active.

## How is the Minimum Due in a Credit Card Calculated

Usually, the minimum amount due on a credit card is around 5% of the total outstanding amount of the current month. However, if you have any credit card EMI, the minimum due amount usually includes that as well. As a result, the overall minimum due amount may be higher in some instances. Here’s an example to help you understand how banks calculate the minimum due amount.

Suppose your card issuing company generates a statement on the 18th of every month and the payment due date is on the 6th of the next month.

Assume that the finance charges are 4% per month. No interest is charged if transactions are made on the 19th and 28th of February.

On 18th March, the first statement gets generated. If the transaction is ₹2,000, the due would be ₹100 (5% of ₹2,000). ₹100 is the minimum amount due.

Before the 18th of April, if you pay the minimum amount, the rest of the amount will incur the interest, that is, ₹1,900 (₹2,000 - ₹100).

Any transaction made in this month before 18th gets added to the outstanding amount. Even though the minimum amount due is paid, the outstanding amount will continue to incur interests. This will be charged as per the finance charges percentage.

• Interest on previous month outstanding amount = ₹76 (₹1,900 x 4%)
• Interest on the current month outstanding amount = ₹40 (₹1,000 x 4%)
• Total Outstanding as on April 18, 2022 = ₹3,016 (₹1,900 + ₹1,000 + ₹76 + ₹40)

## Benefits of Paying the Minimum Amount Due

Although paying just the minimum amount helps you avoid penalties, it has a few other benefits. Here’s a look at a few benefits you enjoy.

• You can avoid late payment fees and pay only the interest by paying the minimum amount due on the credit card.

• You will not be reported to the credit card bureaus for irregular card payments if you pay the minimum amount due on the credit card.

• When you pay the minimum amount due on a credit card, you can keep your credit card active and enjoy the benefits.

## Risk of Paying the Minimum Due Amount of a Credit Card

While there are definite benefits that you can enjoy by clearing the minimum amount due on a credit card, there are some risks involved too. Let's check out why paying the minimum balance amount can sometimes be  a bad idea:

• When you only manage to pay the minimum amount due on a credit card, each time the remaining balance gets carried forward to the next month. Interest is charged on that carried forward amount only increasing the risk of additional expenses.

• Another risk involved in only paying the minimum amount is that the minimum amount due keeps increasing each month you avoid paying the full amount. This is because the balance amount of the previous month gets added to the minimum amount of the current month.

• Interest rates on a credit card can range anywhere between 35-40%. Hence, each time you only pay the minimum amount due on the credit card, you end up paying huge interest on the outstanding amount

• The interest amount is not actually calculated from the end of the billing cycle but from the actual date of purchase. Therefore, whenever you pay only the minimum balance, you incur interest on that amount from day one, wiping out the benefit of credit-free days.

• Lastly, you may risk affecting the credit limit on the card by clearing only the minimum amount due on the credit card

## What Happens if You Only Pay the Minimum Amount Due?

Paying the minimum amount due on a credit card is quite a lucrative and convenient option. This is because however huge your credit card bill is, the minimum amount gives an indication that the bill is payable and will not create a dent in your financial budget.

But what you fail to realise is that by clearing only the minimum amount due each month, you end up accumulating a huge interest on the outstanding amount. Also, your credit score takes a big hit. Lastly, In the long run, clearing only the minimum amount every month will result in your debt extending over years, with eventual interest payments.

## FAQs about Minimum Amount Due on a Credit Card

• ### ✔️What is the minimum amount due on a credit card statement?

The minimum amount due refers to the minimum amount from the total credit card bill you must pay before the payment due date. It is a small percentage, usually 5%, of the total amount spent.

• ### ✔️What happens if you only pay the minimum amount due on a credit card?

If you pay only the minimum due on a credit card, you avoid the late payment fine; however, the interest charges continue to accrue. Also, the outstanding dues from the previous months would get added to the next month’s credit card bill.

• ### ✔️What happens if I don’t pay the credit card bill before the due date?

A late payment fee will be levied initially when you don't pay your credit card bill before the due date. Also, you would lose out on the credit card interest-free period, and your total outstanding dues would start to accrue interest. Any new transactions you make will also start to accrue interest. And finally, your credit score and your credit history will be deeply impacted as well.

• ### ✔️Does the minimum amount due affect credit score?

When you are paying the minimum amount due on a credit card, it will not affect your credit score.

• ### ✔️ Will I be charged interest if I pay the credit card minimum payment?

You will not receive any interest-free credit card period if you have paid the minimum payment. Besides, companies shall charge the interest amount from the date of your purchase. Moreover, the interest amount shall accumulate until you pay the dues.

• ### ✔️How is the minimum payment due amount calculated?

Typically, the minimum amount due on a credit card is around 5% of the total outstanding amount of the current month

• ### ✔️Should you only pay the minimum amount due?

If you are short on funds, it is acceptable to pay the minimum amount due on the credit card. However, to avoid any debt situation, in the long run, it is advisable to pay the full outstanding amount.

• ### ✔️How can I find out the minimum amount due and the payment due date?

You can check the billing statement that is issued by the bank each month to know your minimum amount due on the credit card as well as the payment due date.

• ### ✔️Why is only paying back the credit card minimum due limit considered risky?

Paying back the minimum amount is considered risky because of a number of reasons. Firstly, when you only manage to pay the minimum amount due on a credit card, each time the remaining balance gets carried forward to the next month adding to your debt. Another reason is that the balance amount of the previous month gets added to the minimum amount of the current month. And finally, the credit score as well as the credit limit take a hit if you only consider paying the minimum amount due on the credit card.