The purchase of some costly items has made it easy for us with the use of credit cards. But the card owners feel the ultimate stress at the end of every credit card billing cycle. The cycle lasts 28 to 31 days. Your credit card statement shows the amount due. After receiving the credit card bill, there are two options of making payment-
- Payment of the total amount
- Minimum amount due in credit card
Those who have a shortage of cash like to choose the second option. However, limited benefits are available with this option. Cardholders who regularly pay the minimum amount due will face some issues. Let us talk more about this credit card payment option.
Minimum amount due in a credit card- What does it denote?
The term indicates the minimum amount that you have to pay for the last credit card bill. You know that credit cards let you make an instant purchase, and you can pay for it later. However, the due amount is added to the credit card bill. Thus, when your credit card billing cycle ends, you have to pay for the previous transactions made with the card.
At times, credit card holders cannot make the full payment of their card bills. That is why card providers offer the facility to pay the minimum amount due on the credit card. It is a small percentage of the overall amount. Mostly, it is 5% of your due amount. However, the amount can vary every month based on your deals.
Other relevant factors affecting the minimum amount due in credit cards are-
- The EMI purchases against your card
- The available credit limit
- The due amount in the previous month
In the past month, you may not have paid the minimum amount. That amount will be added to your current month’s minimum amount.
Other things that you must know about your minimum amount due-
- By paying the minimum amount, you can avoid the late payment charge and some other penalties.
- The card issuer calculates it as a percentage of the total bill payments and other related fees.
- The costlier credit card bill results in the higher minimum payment due.
- You must read the credit card statement to know about your minimum payment due. When you cannot find it in your statement, you may access the credit card account. The dashboard will clearly show the minimum amount due.
- There are different modes of paying this minimum amount for your credit card bill. For instance, you may pay using online bank transfers, cheques, and digital wallets. While issuing the cheque, your payment must reach your card issuer.
Why should you pay the minimum amount due?
Due to the shortage of cash, you have a chance to delay the payment. It will result in a penalty. To avoid this situation, you can pay a part of the unpaid amount. In most cases, the flat-rate late payment charge can be from Rs 100 to Rs 1000. Thus, know the due payment date and pay the Minimum amount due in credit card without any stress.
You cannot pay your minimum amount due- What will happen?
When you are unable to pay the minimum due amount before the stipulated date, you will face late payment charges. You will also need to pay the interest on the overall balance along with some other charges. In some cases, the credit card company will deactivate your card while you have gone beyond the credit limit.
The interest rate on the card will be on the rise for missing multiple payments. Moreover, your credit scores and creditworthiness will have serious effects, as you have not paid the minimum amount due. Every time you miss your payment, your debt will be higher.
The minimum amount due paid every month- Will there be an issue?
It is true that the minimum amount due to the payment facility will be advantageous for you. You can reduce the monthly budget issues. However, payment of this minimum amount due will become your habit. When you continue doing it for months, you will be in a debt trap. The total credit card bill will multiply quickly.
The monthly interest on credit cards may not be high. However, the yearly interest rate can be costlier.
For instance, the credit card balance in a month is about Rs. 5000. However, you have thought of paying Rs 200. You will need more than 40 months to pay back the unpaid amount. In fact, you may need more time while you have used the card for further transactions.
Try to pay the total amount due on the credit card –
The best option for you is to pay the due amount in full. You will not need to face debt issues in the future. While you have paid the minimum amount due, there will be an increased debt every month. You will notice an adverse effect on your credit score.
You may apply for Bajaj Finserv RBLBank SuperCard in India. You will receive several benefits if you do so. Some of these include – effortless EMI conversion, emergency advance, ATM cash withdrawal, huge annual savings, reward points on shopping etc.