Credit Card Minimum Due Payment

India has seen a steady rise in the number of credit card users, owing in part to the provision of credit without any interest for a standard period of 45 days, the ease of carrying out transactions through credit cards and attractive discount and cashback offers. This stands in line with the recent efforts made by the government to promote digital payment in all spheres. Therefore, it is important that the users learn more about crucial aspects like the minimum due in credit card. An essential feature involving the payment of credit card bills is that there are two options for the users. They can either pay the total outstanding amount at once or they can just pay the minimum due in credit card i.e., the credit card minimum due amount payment.

The latter can be exercised when the user has overspent or does not have the capacity to make the full payment at that time. This can prove to be a benefit but with certain limitations strapped around it. Therefore, this is an option that should be used in good measure and sparingly. If not, the repeated use of this option can lead to a user falling into the ‘debt trap’. This is an imperative point that should be highlighted to anyone who is about to or already has been making payments through credit car

What is Credit Card Due Amount Payment

The credit card minimum due amount payment is, in literal sense, the minimum amount that should be paid by the credit card user before or on the given due date. This should be done for the maintenance of the account and covers just a small percentage, usually 5% of the total outstanding payment on the credit card bill, although it may vary from bank to bank. This would mean that any person who owns a credit card can make a purchase at any point of time and then pay for the same later. Each purchase is added and is presented as the total outstanding amount at the end of a billing cycle in the bill. The higher the outstanding amount on the bill, the higher will be the minimum amount.

Minimum Due in Credit Card

However, in some cases there might be an increase in this amount, usually if the person has bought anything on an EMI using the said credit card or has exceeded the standard credit card limit. Any payment that has been converted to be paid through EMI will be added to the credit card minimum due amount payment. The minimum due in credit card may also be increased if the user has an outstanding debt from the previous months or the preceding billing cycle. If the minimum due from the previous month or months has not been paid by the credit card owner, it will also get added to the current minimum due in credit card to be paid.

Therefore, the recommended option is to pay the credit card due amount payment if one cannot pay the total outstanding amount so that there are no fee or charges incurred for late payment. The fee ranges between Rs. 100 and Rs. 1000, which depends on the amount due and the credit card that the user owns. The total outstanding credit card bill amount will include the interest charged on the balance too. The credit card bill is printed on the credit card statement generated on a monthly basis. It can also be kept track of online by checking the minimum balance or offline by contacting the customer support of your credit card provider. The due date is also decided upon by the credit card provider and the payment can be made via online transfer, digital wallet or through offline cheque. For the last mode, it is important to ensure that it is done before the due date.

How is the Minimum Amount Due Calculated?

Credit Card Minimum Due

The credit card minimum due amount payment of a customer at the end of a billing cycle is reflected as a small percentage of the total outstanding amount to be paid. Ideally, it is set at about 5% of the total outstanding amount at the end of a month. This is calculated on whichever date the credit card statement is generated by most providers.

 For better understanding of the same, the figure below establishes the manner in which the minimum amount due is calculated in both an interest free and non interest free period. 

Assuming that the credit card statement by your provider is generated on the 6th day of every month and the payment is due on 27th each month, this is the process that leads up to the calculation of the credit card minimum due amount payment.  The minimum amount is being calculated at 5% of the total outstanding balance and the APR stands at 3% per month.

Transaction Date

Type of Transaction

Amount of Transaction

Remarks

April 21

Purchase

Rs.15000

Interest-free period

May 6

Statement Generated

Rs. 15000

Due Date – May 27

Minimum Amount – Rs. 750

May 23

Payment

Rs. 750

Minimum Amount Due Paid

May 28

Purchase

Rs. 15000

Not interest-free period

June 6 

Interest

Rs. 682

On the purchase

June 6 

Statement Generated

Rs. 30,182

Due Date – June 27

Minimum Amount – Rs. 1509.1

It is important to note that in the event that the minimum amount is not paid before or on the given due date, it is added to the minimum amount on the credit statement the following month in addition to the late payment fee.

What if you only pay the Minimum Due in Credit Card?

The credit card minimum due amount payment to be paid each month according to the credit card statement generated each month assists the credit card user if they have exceeded their budget for the month in that they can pay the same and the remaining total outstanding amount later. However, this is only advisable for a few months when the user has no other option. This is because the payment of only the minimum value each month eventually leads to the multiplication of the total outstanding amount to be paid each month. With the monthly interest rate applied on the outstanding balance amount and the annual rate that stands much higher, the minimum due in credit card also continues to increase along with the total due. This can eventually lead to an enormous debt trap. 

Assuming that the total outstanding balance on the credit card statement is Rs. 5000 each month, and the user pays only the minimum due in credit card i.e. Rs 200 , it will take them more than 3 years to pay off the total debt. This would be the case without the addition of any interest on the outstanding amount and given the fact that the user makes no further expenditure using the credit card. Therefore, just paying the minimum due is not the right way to get rid of the total outstanding debt that the owner of the card is left with. This is due to the addition of interest on your outstanding balance each day. To understand the same concept in tabular form, assume that the credit card statement is generated on the 25th of every month and the due date for the payment is on the 10th of each month. The minimum due is again 5% of the total outstanding amount and APR is at 3% per month. 

Date of Transaction

Type of Transaction

Amount Spent

June 25

Total Outstanding Balance

Rs 10000

July 10

Minimum Amount Due Paid

Rs 500

July 10

Total Outstanding Balance

Rs 9500

July 15

Purchase

Rs 2000

July 17

Purchase

Rs. 15000

July 25

Total Outstanding Balance

Rs. 26,880

Apart from the two outstanding amounts getting added to be reflected as the total outstanding amount at the end, there is also the addition of interest in the credit card bill. Therefore, when there is a repetition of non-payment of the total outstanding amount and only the minimum amount due is paid each month, the outstanding balance and the new purchases are added and the interest gets charged at every new outstanding balance. This means that the user does not get any interest free period when they only pay the minimum amount due. 

What if you don't pay the Minimum Due in Credit Card?

When the user does not even pay the minimum amount that is due every month on the credit card statement before the given date, they usually are charged with late payment fees, interest calculated based on the total outstanding balance each month and more. Once the credit card owner surpasses the credit limit of the card, their card can even be suspended by the issuer. Additionally, avoiding the payment of the minimum due amount makes the user ineligible for promotional offers and privileges attached to the card. 

When the user does not pay the minimum due in credit card every subsequent month, it so happens that the organization issuing the card may levy higher interest charges on the person’s credit card. This also affects the credit score of the credit card user in an adverse manner. When the minimum due payment is made after a month or so, the company informs the credit bureau about the delay in the payment of the minimum due in credit card. The fee charged for late payment remains in a person’s credit history and poses difficulties if the user applies for a loan or any form of credit in the future. The non-payment of minimum due in credit card raises the subsequent minimum amount to be paid each month after that and it becomes difficult for the users to pay off the total outstanding balance later.

Minimum Due in Credit Card - Benefit or Burden?

As has been highlighted above, the usage of credit card minimum due amount payment comes with a risk of falling into the debt trap. This means that it should be exercised with caution and the outstanding balance should be paid off so that it does not get carried forward and the interest charge or late payment fees on the same can be avoided. For the delay in payment of minimum due each month, the balance amount keeps increasing and the annual interest rate on the same running between 35-40% annually can be a huge pushback if the total outstanding amount is not paid off. Therefore in this scenario, the credit card users cannot make use of the interest free credit period and retain the credit limit that has been set for them. 

If the user exercises the option of credit card minimum due amount payment and combines it with late payments thus increasing their outstanding balance, they cannot use the available credit limit of the card.  The credit score of the owner gets affected in that the bank or the issuer labels it as ‘default payment’ if the amount is paid after the given due date. The user is also charged with the additional late payment fee on the minimum due. The credit card therefore, can be a greater risk when used in a financial crisis as the person is  prone to falling into ‘debt traps’ 

There can be a measured delay in the paying of the total outstanding amount when the user gets hounded by unanticipated expenditure and cannot pay the entire balance in one go on the generation of the credit card statement. The best case scenario here would be to use the benefit of minimum due in credit card and pay off the remaining balance in the subsequent month itself. The credit card stays active and the account and the issuer remain cooperative. The issuing company would not classify the user as irregular before the credit bureau. Therefore, credit card users in times of financial need can turn to the minimum due option but it is important to try to not make it a norm to do so even when they are capable of paying the balance off. 

Conclusion

Looking at the overview of the credit card minimum due amount payment, it is clear that the risks surpass any benefit that might be accrued to them. The best bet for the user would be to use an alternative in the form of a ‘Personal Loan’ or an ‘EMI’ which generally has a much lesser interest rate. This is a viable option now that some sites provide the option of zero cost EMI.

Possessing a SURE credit card can help you escape the woes of credit card minimum due amount payment. SURE reminds its customers to pay the total outstanding balance or the ‘total due’ in full. SURE card is an easy to obtain credit card that requires no minimum income standard or joining and annual fees from the users. It also provides the customers with an interest free credit period and is accepted all over the world without the usual forex charges applicable to some other credit cards abroad.