What is the minimum due amount on a Credit Card?

05 October, 2023

A Credit Card is perhaps the most important financial invention of the 20th century. This pocket-sized plastic or metal card allows you to make high-ticket expenses. The card issuer pays the retailers upfront on your behalf and sends you a detailed, itemised bill of your expenses on a fixed date that recurs every month. What’s more, the card issuer gives you a lot of flexibility in repaying your Credit Card dues. You may make partial payments, repay the entire outstanding amount, or just pay the minimum amount due. This article explains the concept of minimum amount due in Credit Card, how it is calculated and why you should, at the very least, pay the minimum amount due to continue enjoying uninterrupted Credit Card services.

What is Minimum Due In Credit Card?

The minimum due on a Credit Card is the minimum amount that a cardholder must pay by the due date determined by their Credit Card issuer in order to maintain their Credit Card account in good standing. The minimum amount due is typically a fraction of the total outstanding Credit Card bill payment amount, usually ranging from 5% to 10% of the total amount due. The Credit Card issuer determines the minimum payment on Credit Card based on a predefined formula that considers the outstanding balance, new charges, and any applicable fees or charges associated with payments and monies spent on the Credit Card.

Calculating the Minimum Due In Credit Card

To calculate the minimum due on your Credit Card, you need to look at your monthly billing statement. As mentioned earlier, the minimum due is calculated as a percentage of the outstanding balance. You can find both, the total amount due and the exact minimum amount due for a specific month’s credit cycle mentioned in bold on your Credit Card Statement. The exact percentage can vary depending on the card issuer’s changing policies and the type of Credit Card you hold.

For example, if the outstanding balance on your Credit Card is ₹20,000, and the minimum due percentage is 5% of this total outstanding amount, then the minimum amount due would be ₹20,000 x 0.05 which translates to ₹1,000.

Importance of Paying the Minimum Amount and the Impact of Not Doing So?

Paying the minimum payment on Credit Card is important to avoid negative consequences on your Credit Card account and overall financial health. Some key reasons why paying the minimum due is important include:

• Helps Avoid Late Payment Fees
  
  Failing to pay the minimum due in Credit Card by the due date can result in late payment fees being levied by the Credit Card issuer. These charges can vary based on the outstanding balance and are an additional financial burden that can be easily avoided by timely payments.
  
  Your card issuer may impose late payment charges if the minimum due is not paid on time. These fees can range from a few hundred to several thousand rupees, depending on the outstanding balance.
  
  

• Preserves Credit Score
  
  Your credit score is a numerical representation of your creditworthiness and plays a significant role in your ability to obtain credit in the future. Timely payment of the minimum payment on Credit Card helps to maintain a positive credit history, while late payments can adversely affect your credit score.
  
  Each time you don’t pay your Credit Card bill, your card issuer informs credit bureaus about the delayed or unreceived payments. This impacts your credit score negatively and makes it difficult for you to procure get loans or credit lines in future.
  
  

• Prevents High-Interest Charges
  
  When you pay only the minimum payment on Credit Card, the remaining outstanding balance is carried forward to the next billing cycle. This balance attracts interest charges, which can quickly accumulate and lead to a cycle of debt if not managed properly. Hence it is best to clear off the total due amount as soon as possible.
  
  By paying your dues on time, you can avoid incurring high interest charges, Doing so also prevents you from getting more deeply entangled into a Credit Card debt trap and eliminated the financial burden, that makes it more challenging for you to clear your dues.
  
  

Understanding the Credit Card Billing Cycle

To better understand what minimum amount due in Credit Card is, it is essential to understand the Credit Card billing cycle. The billing cycle typically spans 30 days and starts from the date of the last statement to the current statement’s closing date. During this period, all transactions made using the Credit Card are recorded, and a statement is generated at the end of the cycle.

The statement includes details of the total outstanding balance, new charges, minimum amount due, due date, and other such relevant information. After generating your statement, Credit Card issuers typically give you 15-20 days to pay off your outstanding Credit Card bill, make a partial payment, or at the very least, make the minimum payment on Credit Card before the due date.

Tips to Avoid Late Payment Fees

Making late payments can have a negative impact on your credit score. To avoid late payment fees and the consequences associated with them, you can take the following steps:

• Set Up Payment Reminders
  
  You can utilise electronic reminders, such as email alerts or mobile notifications, to remind yourself of the upcoming due date of your Credit Card. This will help you stay on top of your payment schedule.
  
  

• Automate Your Payments
  
  Most banks offer autopay facilities, allowing you to set up automatic payments for the minimum amount due or full outstanding balance of your Credit Card bill. By automating your payments you can ensure you never miss the due date, nor do you have to worry about accumulating late payment fees.
  
  

• Opt for the ECS Facility
  
  You should consider enrolling for the Electronic Clearing Service (ECS) facility offered by Credit Card issuers, to make your Credit Card bill payments automatically through your linked bank account. This way, the payment is directly debited from your account on the due date and you are notified of the same via SMS and email alerts.
  
  

• Make Timely Payments a Priority
  
  You should treat your Credit Card bills with the same priority as you would any other essential expense. You should allocate funds for bill payments well in advance to cover at least the minimum amount due or, if you can afford it, the full outstanding balance on time. Doing so positively impacts your credit score.
  
  

• Monitor Spending Patterns
  
  You should keep a track of your Credit Card expenses to ensure that you do not go beyond the specified credit limit. You must also make sure that you have sufficient funds in your bank account to pay off your outstanding Credit Card bills. Monitoring your spending patterns help you plan all your financial expenses in advance.
  
  

Summing it Up

As a Credit Card user, you should thoroughly understand the various concepts, jargon, and terminology governing Credit Cards. To ensure your card usage privileges are not suspended, you must pay at least the minimum amount due in Credit Card. Also, you must consider making minimum payments only if you are struggling with a cash crunch. It is best to pay off your entire outstanding dues to prevent interest payment or other fees and charges associated with Credit Card payments.

Get an HDFC Bank Credit Card To Enjoy Flexible Repayment Terms

At HDFC Bank, we offer a range of Credit Cards suiting the requirements of our broad clientele. You can choose from standard cards, reward-based cards, to cards loaded with exclusive benefits for our privileged customers. You can also enjoy enhanced credit limits based on usage, along with flexible repayment terms, opportunities to convert spends to EMIs and more.

Visit the HDFC Bank website to apply for a Credit Card today.


​​​​​​​*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Credit Card approvals at the sole discretion of HDFC Bank Limited. Credit Card approvals is subject to documentation and verification as per Bank's requirement. Interest rates are subject to change. Please check with your RM or closest bank branch for current interest rates.