minimum amount due in credit card means

What Is Minimum Due In Credit Card

✓ Fast Processing ✓ Great Discounts & Offers ✓ Easy EMI Facility | Apply for Credit Card from Axis Bank now!

Minimum Amount Due in a Credit Card

Despite holding a credit card, many individuals still don’t seem to understand what the minimum due in a credit card is.

The Minimum Amount Due in a credit card statement is the minimum amount that you would have to pay within the payment due date to keep your card active and continue enjoying the various credit card features and benefits offered by it. 

Generally, each month before the due date, you’re required to pay the total outstanding amount on your credit card statement in full. Not clearing your credit card outstanding within the due date can lead to severe penalties or even your card getting deactivated.

However, if you’re unable to pay the entire outstanding amount due to lack of funds, what do you do? Here’s where the concept of minimum due in a credit card comes into the picture. Banks usually give you an option to pay a fraction of the total outstanding amount, known as the minimum amount due, before the due date. This will not only help keep your card active, but will also prevent the levy of penalties.

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 and as a result can be higher. Here’s an example that can help you understand how banks calculate the minimum due amount.

Finance Charges

4% per month

Statement Generation Date

18th of every month

Payment Due Date

6th of the next month

 

Transaction Amount

₹1,500

Transaction Date

February 19, 2022

Transaction Amount

₹500

Transaction Date

February 28, 2022

Statement Generation Date

March 18, 2022

Payment Due Amount

₹2,000

Minimum Amount Due

(5% of Payment Due Amount)

₹100 (5% of ₹2,000)

Amount Paid by the Due Date

₹100


In this case, you’ve paid ₹100, which is the minimum amount due, out of the total outstanding amount of ₹2,000. While this can help avoid penalties and keep your card active, you still have ₹1,900 (₹2,000 - ₹100) outstanding on your credit card.

And if you make any transactions in the following month, the transaction amount will get added to your current outstanding amount. Here’s a quick look.

Transaction Amount

₹1,000

Transaction Date

March 24, 2022


Now, since you’ve only paid the minimum amount due, interest will be levied on your outstanding balance, which you will have to pay by the end of the next month’s due date. Here’s something that can give you some clarity.

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

Now that you know what paying only the minimum due in a credit card statement does to your finances, let’s take a look at a few benefits that you get to enjoy.

  • You can avoid late payment fees

  • You can manage your finances better during an emergency, especially when you’re low on funds

  • You can keep your credit card active and continue to enjoy its benefits

  • You can prevent your credit score from getting affected

Disadvantages of Paying Only the Minimum Due on a Credit Card

It is important to know what the minimum amount due in a credit card is. But what’s equally crucial is understanding the disadvantages that come with paying only the minimum due. Here’s a quick look at the downsides of this practice.

  • The available credit limit on your card will be reduced

  • The credit card interest rate will continue to be levied on your total unpaid balances

  • The interest-free credit period will not be available

  • All new purchases will start to accrue interest right from the date of transaction

  • The burden of interest can put a huge strain on your finances

  • Your credit score will be negatively impacted if this continues for a long period of time

FAQs about Minimum Amount Due on a Credit Card

  • ✔️What will happen if I pay only the minimum amount due for a long time?

    When you continue to pay only the minimum amount due in credit card for a significantly long period of time, your unpaid outstanding balances will continue to accumulate hefty interest, landing you in a debt trap.

    You will lose the interest-free period on new purchases, which will also start to accrue interest from the date of transaction. And your credit score will be severely impacted.

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

    Minimum amount due (MAD) refers to the minimum amount from the total credit card bill that you must pay before the payment due date. It is a small percentage, usually 5 percent, of the total amount spent. 

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

    If you pay only the minimum due in 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.

  • ✔️Is it bad if I only pay the minimum due in my credit card?

    Paying only the minimum amount due in a credit card for a long period of time can land you in a debt trap. The interest-free period on your new purchases would be canceled and the outstanding dues for past months would keep accruing interest. This would soon multiply the due amount beyond your capacity to repay while also harming your credit score.

  • ✔️What happens if you don’t pay the minimum amount due?

    If you don’t pay the minimum amount due in a credit card on or before the due date, the card issuer will levy a penalty. Additionally, you will lose the interest-free period on your credit card and your credit score will get negatively impacted. In some cases, your card may also be blocked by the issuer. 

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

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

Happy Customers of Finserv MARKETS

Getting a loan to take care of my wedding and relieving my parents to enjoy the occasion was the best decision I ever made. Easy-to-apply, amazing interest rate and quick disbursal, what more can one ask for!

I am passionate about the vehicle I drive. I want to protect it with the best available option. What amazed me was the full transparency, quick quotes and the attractive discount on the premium while choosing the annual payment option!

Check your personal loan eligibility in seconds!

My husband and I will finally move into our own house this Diwali. All thanks to Finserv Markets, with competitive interest rates, minimal processing fees and easy to repay EMIs, our dream saw the light of reality in no time!

Get the best FD interest rates starting @ 8.40%. Let's start!

Kids grow up fast and to fulfill their dream trip to Disneyland I had everything but instant funds. With no collateral or guarantor required and a hassle-free processing, I gifted my family a memorable trip to Orlando with just a click!

Get sum insured up to 1 Crore! Let's start!

The best way to start looking for health insurance is to do a close study of the coverage needs and checking the insurance company's claim ratio. No unnecessary jargons, easy to apply claims process and choice of premium!

Zero additional charge on part-payment option on Business loans! Let's start!

I bought my first iPhone using my Bajaj Finserv EMI Network Card. Zero downpayment with a No cost EMI on Bajaj Finserv EMI store just made my day!

Get home loan sanctioned online in 72 hours! Let's start!