What is the minimum amount due on credit cards?

2 min read

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. If you have an unpaid balance from the previous billing cycle or exceed your credit limit, that amount is also added to the credit card minimum due.

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.

Benefits of paying the minimum amount due on your credit card

There are numerous benefits of paying the minimum amount.

  • In doing so, you continue to keep your credit card active and can use the card for the total available credit limit minus the amount converted to EMIs.
  • Your credit score remains unchanged, as the issuer will not classify your payment as a ‘default payment’ in the credit record if you pay the amount on time.
  • The chances of late payment fees being levied are eliminated.

Risk of paying the credit card minimum due

  • Upon paying the minimum amount, the rest of the balance is carried forward and interest is charged on that amount.
  • For every month that you delay making payments of the full credit card usage amount, the minimum amount increases for that month, as the balance amount of one month is added to the minimum amount of the following month.
  • Credit card interest rate usually varies between 35-40% yearly.
  • Interest on the credit card is charged from the date of the purchase and not from the end of the billing cycle. This means that when you only pay the minimum balance, you automatically incur interest on that amount from the very first day and cannot take advantage of the credit-free period.

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