Minimum Due: Know the calculations of the Minimum Due in the payment by credit card, are you a victim of atrocities committed by companies?

Photo: FILE credit card payment

Strong points

  • If you are unable to pay the full bill, you can also pay the minimum due.
  • The minimum amount due is actually part of your total bill.
  • Normally, the minimum amount due is 5% of your total outstanding amount

Minimum due: People often think of the credit card as a magic wand. We are told thousands of dollars not to spend more than your limit. But heart is heart, I don’t believe, where whatever you want, then your hand is right on the pocket, the card is swiped and the thing is yours. But in this we forget that at the end of the month, you have to pay the expenses. Credit card companies understand very well the distance between your heart, your mind and your pocket. This is the reason why these companies offer you a facility, which they do Minimum Amount Due.

The minimum amount due draws you into the bill

If you look closely at your credit card bill, you will see the total bill amount. Additionally, the Minimum Amount Due option will also appear in the next box. The minimum amount means that if you are unable to pay the entire bill, you can also pay this amount.

Don’t breathe a sigh of relief paying the minimum due

If you do Minimum Amount Due in a month’s bill, that shouldn’t be considered enough. It does not mean that you have been relieved of the credit card bill at all. It’s a kind of debt trap. The money that the company takes from you each month in the name of the minimum amount due, is only consumed in interest and processing fees. Your initial amount remains the same.

What is the minimum amount due

The minimum amount due is actually part of your total bill. This relieves you of additional penalties such as credit card late fees. But you will have to pay around 3-4% per month on the entire bill. As a result, you will pay around 40-50% interest per year. This too will have to be paid from the day you made the purchase.

Minimum amount due calculations of

Normally, the minimum amount due is 5% of your total outstanding amount. But this amount can vary from bank to credit card. If the total amount outstanding on your credit card bill is high, it may be less than 5% of that amount. If the total invoice amount is less, it can also be around 5%.

Is there any harm in that?

Yes. Paying only the minimum amount due on the credit card bill can land you in a debt trap. Because, this amount is used for payment of interest and not for payment of principal amount. Interest will continue to be charged until you have paid your dues in full. At the same time, you have to pay interest of up to 50%. which can be qualified as an offence.

Is the CIBIL report bad? (Civil Score)

Often banks tell you that the CIBIL score does not deteriorate if you pay the minimum amount due. But experts say that when your loan amount remains or continues to increase instead of decreasing, the CIBIL score is bound to deteriorate. Also, the bank will identify you as a cash-strapped customer. It is possible that such a client will fall into the whirlwind of debt in the coming days.

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