Credit cards are an integral part of modern life. It effortlessly bridges the gap between needs and financial flexibility. From savouring a gourmet meal at your favourite café to planning a quick escape for the weekend, your credit card is there to make life easier.
Understanding credit card statements can be tricky, especially with all the different terms and figures involved. However, terms like the ‘minimum amount due’ can sometimes create confusion. So, what is the minimum amount in credit card statements? If you’re curious about how it works and how it affects your finances, keep reading.
What Is The Minimum Amount In Credit Cards?
The minimum amount due is the minimum payment you need to make to avoid penalties and keep your credit card account in good standing for the month. It’s usually a small part of your total outstanding balance, often around 5%.
This amount might also include any unpaid dues from previous months and additional charges like late fees. For instance:
| Total Outstanding Balance | Minimum Amount Due (5%) | Late Fees | Total Minimum Due |
| ₹50,000 | ₹2,500 | ₹0 | ₹2,500 |
Why Do Credit Card Issuers Offer a Minimum Due?
Credit card companies understand that not everyone can pay off their balances in full each month. Offering a minimum payment ensures that:
- You don’t default on the payment due to lack of funds
- You can get an extension on the bill payment
- Your credit card account remains active.
- Your credit score isn’t negatively impacted.
- The issuer continues to earn interest on the unpaid amount.
How Is The Minimum Due Calculated?
The calculation is straightforward but varies slightly between issuers. Here’s a general formula:
Minimum Due = (Percentage of Outstanding Balance) + (EMIs if applicable) + Fees
Example:
| Component | Amount (₹) |
| Outstanding Balance | ₹40,000 |
| EMI on Purchases | ₹2,000 |
| Late Fees | ₹500 |
| Minimum Amount Due (5%) | ₹2,000 |
| Total Minimum Due | ₹4,500 |
Benefits of Paying the Minimum Amount Due
While paying the full balance is always advisable, there are situations where the minimum payment can be a lifesaver:
- Avoid Late Payment Fees: Meeting the minimum requirement prevents hefty late penalties.
- Protect Your Credit Score: Consistently paying at least the minimum amount shields you from the dreaded “delinquent” status on your credit report.
- Buy Time for Larger Payments: If you’re short on funds, the minimum due buys you a grace period for the remaining balance.
The Catch: What Happens When You Only Pay the Minimum?
Paying just the minimum might seem like a manageable strategy, but there’s a flip side:
- High-Interest Costs: The unpaid portion of your bill incurs steep interest rates (often 30-40% annually)
- Debt Cycle Risk: Your outstanding balance keeps piling up, potentially leading to a debt trap
- Reduced Credit Limit: With a growing unpaid balance, your available credit shrinks, limiting future spending
Examples of interest accumulation:
| Month | Outstanding (₹) | Minimum Paid (₹) | Interest (3%) | New Balance (₹) |
| Jan | ₹50,000 | ₹2,500 | ₹1,425 | ₹48,925 |
| Feb | ₹48,925 | ₹2,446 | ₹1,417 | ₹47,896 |
Notice that the balance reduces slowly, but the interest keeps accumulating. If you stick with paying only the minimum due, this can lead you to pay more than the borrowed amount.
When Should You Rely on Minimum Payments?
Here are some situations where you can consider paying only the minimum amount due towards your credit card and not the entire bill:
- Financial Emergencies:
If an unexpected expense strains your budget, paying the minimum ensures your account remains in good standing.
- Short-Term Liquidity Issues:
A temporary cash crunch can be managed by minimising your credit card outflow.
- Avoiding Credit Score Hits:
Missing payments altogether impact your score significantly more than making the minimum.
Tips To Manage Your Credit Card Payments Smartly
Incorporate the following strategies into your financial planning and manage your card payments better:
- Pay More Than the Minimum
Whenever possible, pay off a portion of your outstanding balance beyond the minimum amount due. It reduces interest charges significantly.
- Set Up Automatic Payments
Avoid late fees by setting up auto-debits for at least the minimum amount. Bonus: No more missed deadlines!
- Track Your Spending
Use your card issuer’s mobile app or online portal to monitor transactions and know your current balance.
- Prioritize High-Interest Cards
If you have multiple cards, focus on repaying the ones with higher interest rates.
- Use Balance Transfer Offers
Some banks allow balance transfers to a new card with lower interest rates, easing repayment.
Minimum Due vs. Full Payment: A Quick Comparison
Refer to the table given below to understand how the full payment and minimum due towards a credit card differ and their impacts:
| Aspect | Minimum Due Payment | Full Payment |
| Impact on credit score | Positive (if paid on time) | Positive |
| Interest charges | Apply to the unpaid balance | None |
| Debt reduction speed | Slow | Fast |
| Financial flexibility | Retained for emergencies | Reduced for the month |
Understanding the concept of the minimum amount due on a credit card is a crucial part of managing your finances wisely. While it offers flexibility during challenging times, consistently making only minimum payments can lead to higher interest costs over time.
Therefore, whenever possible, aim to pay more than the minimum to reduce your debt faster and save on interest. Tools like credit card apps can assist in tracking spending and setting repayment goals, ensuring you maintain financial control.
This is why the One Credit Card stands out for managing the minimum amount due effectively. It provides detailed statements and repayment options that align with your financial needs. With features like flexible payment plans, real-time spending alerts, and insightful analytics, the card helps you stay organized.
By using the OneCard App, you can enjoy the benefits of a credit card while avoiding unnecessary debt – a perfect balance for smart financial management. You can also enjoy many partner offers on shopping, dining, entertainment, travel and other categories so you can shop your heart out.
Additionally, on the One Credit Card App, you earn guaranteed 5X rewards on the top two spend categories per month. It is a lifetime free credit card that does not charge any fee to redeem your reward points. So, you can also discover great online and offline offers on the app and use them to save more on every transaction. Apply now and discover a world of benefits at your fingertips.