Sometimes, having a credit card can lead to unnecessary additional purchases, resulting in difficulties when the credit card bill arrives. In such cases, repaying the amount becomes challenging because the expenses may exceed your income.
Fortunately, banks offer a solution called the ‘minimum payment due’ option, allowing you to pay only a portion of the total outstanding bill instead of the entire amount at once. This mandatory partial payment lets you pay the minimum amount due in credit card. When users choose to pay only the minimum amount, interest is only charged on the remaining balance.
Despite these advantages, paying the complete bill in one go is still advisable. Why is this recommended? Please read more to get answers to your questions for detailed insights.
What does ‘Minimum Payment Due’ mean?
The term ‘Minimum Payment Due’ refers to the compulsory partial payment of the outstanding balance you must make to the bank when you cannot pay the entire bill amount. Here are some critical features explained:
How is the Minimum Amount Due calculated?
Typically, the minimum amount due in credit card is set at 5% of the total outstanding balance calculated on the credit card statement issuance date. However, there are specific scenarios where the following charges may also be added to the user’s minimum amount due:
- If a user chooses to convert their purchases into installments (EMIs), the interest amount will be included in the minimum amount due.
- If there is any unpaid minimum balance from the previous month’s billing cycle.
Please note that the exact calculation may vary depending on your credit card agreement’s specific terms and conditions.
Some Tips for Paying Minimum Amount Due
- Review your household budget and identify areas where you can reduce expenses to free up money for minimum payments:
- Analyze your monthly income and expenses to determine where to make cuts or adjustments.
- Look for non-essential expenses you can temporarily eliminate or reduce to avoid credit card to bank account transfer, such as subscriptions to streaming services, dining out, or entertainment expenses.
- Consider prioritizing essential expenses like groceries, utilities, and housing, while minimizing discretionary spending.
- Consider cutting back on non-essential expenses such as streaming services or dining out:
- Evaluate your subscriptions and memberships to identify services you can temporarily cancel or downgrade.
- Cook meals at home instead of eating out or explore affordable meal options.
- Limit discretionary spending on entertainment, shopping, or luxury items until you meet your minimum payment obligations.
- Explore opportunities to increase your income, such as finding a side hustle or passive income source:
- Look for part-time or freelance work opportunities that align with your skills and schedule.
- Explore online platforms that offer gig work or remote job opportunities.
- Consider utilizing your talents or hobbies to generate additional income through freelancing, tutoring, or selling handmade products.
- Investigate passive income streams like rental properties, investments, or online businesses that can generate ongoing revenue.
- Contact your credit card issuer and inquire about hardship programs or options to lower your minimum payment:
- Reach out to your credit card issuer and explain your financial situation.
- Inquire about any available hardship programs or options they may offer to help reduce your minimum payment or provide temporary relief.
- Understand the terms and conditions of any assistance programs, including potential impacts on interest rates or credit limits.
- Take advantage of any financial assistance or accommodations your credit card offers during times of financial difficulty:
- If your credit card issuer provides financial assistance programs, review the terms and conditions carefully.
- Consider options like payment plans, balance transfers, or interest rate reductions that can alleviate your financial burden.
- Before accepting assistance, ensure you understand any potential long-term effects on your credit or account terms.
What are the Benefits of Paying Only the Minimum Amount Due?
Avoiding additional charges: By paying the minimum amount due, users can prevent additional late fees or penalties as they fulfill the minimum payment requirement within the billing cycle.
Credit reporting: Consistently failing to make credit card bill payments on time can negatively impact a user’s credit history, as it may be reported to credit bureaus as irregular repayment behavior. However, if the user makes at least the minimum payment on time, it can help avoid adverse credit reporting.
Credit score preservation: Credit card repayment behavior directly influences credit scores. Failing to pay credit card balances on time can have a detrimental effect on the credit score. However, by making at least the minimum payment by the due date, the impact on the credit score can be minimized to some extent.
Also Read: Write For Us
Conclusion
Making the minimum payment on your credit card to bank account transfer is crucial to staying current with your credit card issuers, ensuring you avoid late fees and penalties. Making at least the minimum monthly payment is essential to maintain a good credit history. However, it is advisable to make more than the minimum payment whenever you can.
