Minimum Amount Due on Credit Cards

Turned your credit card payment into EMIs? Here’s all you need to know about the minimum amount due.

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Wondering what is the minimum amount due on a credit card? The answer is simple. As the phrase suggests, it is the minimum amount that you have to pay towards your credit card bill. You can pay this amount on or before the due date. Generally, you don’t need to calculate this amount as the issuer will mention it on your credit card bill.

How is the Minimum Due on a Credit Card Calculated

Usually, the minimum amount due on a credit card is around 5% of the total outstanding amount in the current billing cycle. However, if you have any credit card EMI, the minimum due amount usually includes that as well. As a result, the overall minimum due amount may be higher than the amount spent in some instances.

Here’s an example to help you understand how banks calculate the minimum due amount.

Assume that the credit card issuer releases the billing statement on the 18th of every month. So, the final date to pay the due amount is on the 6th of the following month. Imagine that the finance charges are 4% per month. No interest is charged if transactions are made on the 19th and 28th of February. On 18th March, the first statement was generated. If the transaction is initiated for ₹5,000, the minimum due would be ₹250 (5% of ₹5,000).

If you make the minimum payment before the 18th of April, the outstanding amount will incur the interest, that is, ₹4,750 (₹5,000 - ₹250). Any transaction made in this month before 18th April gets added to the outstanding amount. Even if you pay the minimum amount due, the outstanding amount will continue to incur interest.

This will be charged as per the finance charges percentage:

Interest on previous month outstanding amount = ₹190 (₹4,750 x 4%)
Interest on the current month outstanding amount = ₹120 (₹3,000 x 4%)
Total Outstanding as of April 18 = ₹8,060 (₹4,750 + ₹3,000 + ₹190 + ₹120)

Benefits of Paying the Minimum Amount Due

Here are some of the benefits you get when you just pay the minimum amount due on a credit card:

You could maintain a better credit score by paying the minimum amount due before the due date
You won’t have to worry about the late payment fees and pay only the interest on the outstanding amount
You can easily manage your monthly budget, especially when you’re short on funds, by paying the minimum due on your credit card
You can use the additional funds to meet other financial obligations while avoiding late payment fees and other penalties
You can also keep your card active and enjoy its benefits by paying the minimum amount due on your credit card

How to Increase Your Credit Card Limit

Your credit card limit is assigned to you based on your financial standing, and the way you manage your existing credit. Naturally, paying only the minimum amount every month isn’t the best way to get a higher limit.

Here are some smart ways to increase your credit card limit:

Request your bank or the credit card issuing company to enhance your credit limit
Boost your credit score to up to 750 or above
Keep your credit utilisation ratio below 30%
Check for an annual hike with your issuer
Opt for a credit card with a higher credit limit
Reduce your existing credits and loans
Maintain proper discipline when paying credit card dues

While all these points can help in increasing your card limit, you need to apply for a credit card that best fits your monthly financial requirements. Hence, before increasing the card limit, ensure your monthly obligations are well within limits.

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What does the ‘minimum amount due’ mean on my credit card statement?

The minimum amount due refers to the mandatory amount from the total credit card bill you must pay before the payment due date. It is a small percentage, usually 5%, of the total amount spent.

What are the consequences of paying just the minimum amount due on my credit card?

You avoid the late payment fine by paying only the minimum amount, but the outstanding amount will continue to accrue interest. Also, the outstanding dues from the previous months would get added to the next month’s credit card bill.

What happens if I fail to pay the credit card bill before the due date?

A late payment fee will be levied initially when you don't pay your credit card bill before the due date. Also, you would lose out on the interest-free period on the credit card, and your total outstanding dues would start to accrue interest.

Any new transactions you make will also start to accrue interest. This can affect your credit score and credit history.

Does the minimum amount due affect your credit score?

Yes. When you are paying the minimum amount due on a credit card, your credit score could get affected.

Will I be charged interest if I pay the minimum credit card amount due?

You will not receive any interest-free credit card period if you have paid the minimum payment. Besides, companies will charge the interest amount from the date of your purchase. This interest amount shall accumulate until you pay the dues.

How is the minimum due amount calculated?

Typically, the minimum amount due on a credit card is around 5% of the total outstanding amount of the current month.

Should you only pay the minimum amount due?

If you are short on funds, it is acceptable to pay only the minimum amount due on the credit card. However, to avoid any debt situation, in the long run, it is advisable to pay the full outstanding amount.

How can I determine the minimum amount due and the due date to make the payment?

You can check the credit card statement issued by the bank each month to determine the minimum amount due on a credit card. Check the due date on your statement to make the payment on time.

Why is repaying only the credit card minimum due limit considered risky?

By only paying the minimum amount due, the outstanding balance gets carried to the next instalment, increasing your financial burden. There is no significant reduction in the outstanding amount that is due. The balance, hence, remains unpaid. As a result, you won’t be able to redeem your total credit limit.

Do I have to pay interest if I pay the minimum due amount?

Yes. You must pay the interest on the outstanding amount if you pay only the minimum due and not the total outstanding amount before the grace period.

What is the difference between minimum payable and total due on the credit card statement?

The total due amount is the outstanding credit of the current billing cycle, along with the balance carried over from the previous bill. On the other hand, the minimum amount due on a credit card is the minimum payment needed to avoid a late payment penalty.

How is the outstanding amount calculated after I pay the minimum due amount?

The minimum amount due on a credit card is set at 5% of the total amount due. You can calculate the outstanding amount by subtracting that from the total due amount.

So, if your total amount due is ₹10,000, then your minimum amount due will be ₹500, and the total amount due will be ₹9,500.