Minimum Amount Due in a Credit Card – Explained!

Banks offer several features on credit cards along with shopping and lifestyle benefits such as lifetime free credit cards, travel benefits cards and more. Credit cards are financial tools that offer pre-approved short terms loans with a certain grace period. No interest is charged if you repay your outstanding amounts within the grace period. However, sometimes the expenses on the credit card exceed your monthly budget and, you may need to pay them in parts. 

To facilitate your repayments, banks offer EMI options where you have the choice of paying your outstanding amount in parts or in full. If you choose to pay in instalments, you can either pay the minimum amount due plus your EMI or an amount of your choice above the minimum due amount.  

Understanding the minimum amount due on a credit card

If you own a credit card, you must have come across the term ‘minimum amount due’ and the total outstanding balance. A minimum amount due is a part of your outstanding credit card balance, that you must pay every month in order to avoid any penalties. The necessary amount is calculated based on your total outstanding, the interests, and the EMI tenure. In case you fail to pay the minimum due amount, the bank charges a late payment fee and other penalties as per its terms and conditions. 

If you don’t have a card and wish to know how to apply for a credit card, you must first understand the key terminologies and make an in-depth credit card comparison through online and offline resources. 

In case you are looking for a suitable credit card according to your spending habits, IDFC FIRST Bank offers a comprehensive range of credit cards with minimal charges and low interest, making them one of the most affordable options. In addition, you get up to 10X rewards and several shopping benefits on every expense. 

How is the minimum amount due calculated?

In general, the minimum amount due is based on the total outstanding balance and, it is fixed at 5% of your total outstanding amount as calculated on the credit card statement date. However, the minimum amount that you need to pay every month may vary depending on the active EMIs on your card or the unpaid dues from the previous billing cycle. 

So, the final minimum amount due gets added to the unpaid balances in your credit card statement. 

Should you pay only the minimum amount due on your credit card?

Simply put, the minimum amount due on your credit card is a way to facilitate easy repayment for you. In case you have large debts on your credit cards and are unable to repay them on time, you can resort to paying only the minimum amount due to avoid penalties. 

However, only paying the minimum amount due, can increase your debts on credit cards as it is only 5% of your total outstanding amount. Any new expenses using the credit card will only add to your outstanding amount and your overall credit card repayments. 

Hence, it is always advisable to repay your outstanding amounts in full before the due date. If you are unable to pay the full amount, convert your bills into an EMI and repay them consistently to avoid penalties and degrade your credit score.