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 statement? ›
The minimum amount due is typically a fraction of the total outstanding Credit Card bill payment amount, usually ranging from 5% to 10% of the total amount due.
What is the minimum amount due in a BPI credit card? ›
It is computed as 3.57% of your Total Outstanding Balance less new purchases, cash advances and adjustments, or PHP 850, whichever is higher. The minimum amount due computation will remain the same for your BPI credit card.
What should be the minimum balance in credit card? ›
Let's consider a small example for clarity. Suppose you have a Credit Card with an outstanding balance of ₹20,000. Your Credit Card company requires a Credit Card minimum payment of 5% of the outstanding balance. So, your minimum due would be 5% of ₹20,000, which amounts to ₹1,000.
What is credit card minimum 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.
What happens if I only pay the minimum amount due? ›
You will not be offered any interest-free credit period if you have paid only the Minimum Amount Due (MAD) and not the credit card outstanding in full. Rather, you will be charged an interest amount from the date of purchase. The interest amount will also keep accumulating till you settle the dues.
What is the minimum payment on a $3,000 credit card? ›
The minimum payment on a $3,000 credit card balance is at least $30, plus any fees, interest, and past-due amounts, if applicable. If you were late making a payment for the previous billing period, the credit card company may also add a late fee on top of your standard minimum payment.
What if I go below maintaining balance BPI? ›
The Bank may impose and collect service charges and/or maintenance fees on Accounts, whether active or dormant, where the Account balances: (i) have fallen below the required minimum monthly ADB, for dormant accounts; and (ii) have fallen below the required monthly minimum ADB for at least two (2) consecutive months, ...
How to compute for minimum amount due? ›
MAD is the sum of the following:
- 3% of the outstanding balance less installment amortizations, over-limit amount and new transactions posted within the current statement period*, or ₱850 or US$17, whichever is higher;
- 3% of installment amortization;
- Overdue Amount; and.
- Over-Limit Amount.
On some cards, issuers use a flat percentage — typically 2% — of your statement balance to determine your minimum. If your balance (including interest and fees) were $10,000, for example, you'd owe a minimum of $200.
Paying only the minimum amount means: it takes you longer to pay off your balance. you pay more interest.
What is your minimum balance requirement? ›
A minimum balance is an amount your bank or credit union may require you to keep in your account at all times. Depending on the financial institution's rules, following the balance requirement can help you avoid fees and potentially earn a higher annual percentage yield (APY).
Does paying minimum due affect credit score? ›
Over time, if you pay just the minimum amount due, you will fall into a debt trap. In the long run, this also increases your credit utilization ratio, which in turn can affect your credit score adversely.
What is an example of a minimum payment? ›
For example, if your balance is $700 and your minimum payment is either 2% of the balance or a fixed amount of $25, whichever is greater, 2% of $700 is $14, so your minimum payment will be the fixed amount of $25. If there is an amount past due or an overlimit amount, it could also be added to your minimum payment.
Is minimum payment bad for your credit? ›
What you might not know is that sticking to the minimum payment plan each month might impact your credit scores too. This is because of the factors that make up your credit score. Payment history matters most where your credit score is concerned. It's worth 35% of your FICO Score.
What is the minimum payment on a $2000 credit card? ›
Minimum Payment on a $2,000 Credit Card Balance by Issuer
| Issuer | Standard Minimum Payment |
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| Capital One | $25 |
| Chase | $35 |
| Citibank | $30 |
| Credit One | $100 |
6 more rowsOct 19, 2021
What happens when you only make the minimum payment. While it's important to make at least the minimum payment, it's not ideal to carry a balance from month to month, because you'll rack up interest charges (unless you're benefiting from an intro 0% APR) and risk falling into debt.
Does paying minimum due on credit card affect credit score? ›
Over time, if you pay just the minimum amount due, you will fall into a debt trap. In the long run, this also increases your credit utilization ratio, which in turn can affect your credit score adversely.
What is total minimum payment due or statement balance? ›
Should you pay your statement balance or current balance? You have to pay your statement balance -- not your minimum payment due -- in full by your payment due date to avoid accruing interest.
