If you own a credit card, you might know the payments due at the end of every month. Calculative spending enables you to use your salary and pay the total amount due on a credit card at the end of the month. But what if you spend and cannot clear your dues?
Here’s where the concept of credit card minimum due enters the field. In case of a financial crunch before the due date of your card payments, you can pay this amount to avoid late fees and make up for the outstanding amount during the next cycle.
But how does the minimum due work? Why do banks employ this model?
What is the minimum due on a credit card? It is a fraction or a small percentage of the total amount you owe. You must pay your minimum due on or before the next due date to avoid incurring late charges and adding to your woes.
Most credit card providers cap the minimum due amount at approximately 5% of the total pending balance at the time of the issuance of the credit card statement. However, a credit card's minimum due may include other charges, like EMI interest amounts or unsettled minimum dues from the previous months.
It provides an easier way to relieve you from financial burden, especially during additional credit card expenditure or when your salary is affected. Plus, the benefits of clearing the minimum due amount are plenty.
It might be natural to ask - what is the last bill due on a credit card, and why does it matter so much? Here are some ways in which timely payment of the minimum due helps you:
Plus, the credit card provider will also be assured of your reliability and be more willing to offer your credit requirements in the future if the need ever arises.
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The minimum due is a small fraction of the total outstanding amount to be paid on your credit card. It is vital as paying the minimum due helps you avoid late fees and does not adversely affect your credit score.
The minimum due amount is 5% of the total outstanding amount. It largely depends on your interest rate and monthly balance.
Not only will your credit provider levy a late charge on top of the interest accrued, but you will also notice a drastic reduction in your credit score if you do not pay the minimum due on or before the due date.
After paying the minimum due, your credit score will only take a short tumble. However, not paying any amount will cause it to fall even further, making restoring it to the original number difficult.