Credit Card: Minimum amount due and why to pay it right away?

  • Published on: 9 Nov 2023
Credit Card: Minimum amount due and why to pay it right away?

When you use a credit card, the minimum amount due is one of the options that you will see in your card statement. If you are unable to clear your credit card bill in full due to budget restrictions or any other reason, paying the credit card minimum due amount is a smart option.

Read on to learn what the credit card minimum amount due is, how to calculate it, why you should pay it and more. 

What is the minimum amount due on a Credit Card?

When a credit card issuer generates your monthly credit card statement, it includes your total payable amount. You must pay this amount before the due date to avoid penalties and interest charges. 

However, if you cannot pay the total amount due, then you must pay the minimum amount. The minimum due is a fraction of your total outstanding amount. Paying this amount ensures that your credit card remains active. After paying the minimum amount, the unpaid balance gets carried forward to the next billing cycle and attracts interest. 

How is the minimum amount due on a Credit Card calculated? 

Generally, the minimum due amount is 5% of the total billing amount for the cycle. So, you need to pay only a small portion of your dues. However, if you have an outstanding balance from the previous billing cycle, then your minimum due on a credit card will be higher.

See the example below to understand this further. Say your issuer generates your credit card statement on the 21st of the month and the due date is the 5th of the following month. If your issuer charges an interest of 5%, here’s how you can calculate your minimum due amount.

Date of TransactionTransaction type Remark 
9 SeptemberSpent ₹700No interest or late fees charged 
15 SeptemberSpent ₹1800No interest or late fees charged 
19 SeptemberSpent ₹1000No interest or late fees charged 
21 SeptemberStatement generated for ₹3500 Minimum due amount is ₹175
5 OctoberPaid ₹175Minimum amount paidOutstanding ₹3325 will incur interest at 5%, which is ₹166.25
9 OctoberSpent ₹1500Interest at a 5% rate applied, which is ₹75
21 OctoberTo pay: ₹166.25 + ₹75 = ₹241.25Total interest for the next statement 
21 OctoberDue: ₹3325 + ₹1500 + ₹241.25 = ₹5066.25Statement generated for ₹5066.25Minimum due amount is ₹253.31

Note that this is a simplified calculation, as you may have to pay other charges in your total credit card bill, which can increase your billing amount. 

Also Read: How To Check Credit Card Balance

Like many others, you too may wonder, “What if I pay minimum amount on credit card dues each month?” After reviewing the above calculations, you can see that when you pay only the minimum amount, you will have to pay a higher minimum due amount in the following cycle. Your outstanding balance also remains unpaid. 

Pros of paying the minimum payment due on a Credit Card

By addressing your credit card’s minimum amount due, you can avail some financial benefits, as listed below: 

  • Allows you to pay your bill when you are low on funds 
  • Keeps your credit card active
  • Helps avoid late payment charges 
  • Keeps credit card companies from reporting your account as a defaulter

Cons of paying the minimum payment due on a Credit Card

While it can be a helpful option in certain cases, you must also know the drawbacks of paying only the minimum amount on your credit card bill. 

  • You may not get an interest-free period 
  • You may attract a higher interest on your outstanding balance
  • Your credit utilisation ratio will increase 
  • Your credit score will be adversely affected if this happens too often

As you can see, simply paying your credit card’s minimum due amount is a good option when you are running short on finances. However, paying only the minimum due on a credit card frequently can negatively affect your creditworthiness and increase your debt over time. 

So, ensure you manage your credit card well and use one that offers a range of money-saving benefits. One such card is the Fibe Axis Bank Credit Card. With zero joining and annual fees and up to 3% cashback on spends, this card helps you easily manage your expenses. Download the Fibe App or register on our website to apply for the card now! 

FAQs on Credit Card Minimum Amount Due

Does paying the minimum amount due affect my credit score?

When you pay only the minimum due on a credit card, your outstanding balance grows, which increases your credit utilisation ratio. When this ratio goes above 30%, it affects your credit score negatively. So, you can hurt your credit score over time if you continue paying only the minimum due amount.

What happens if I pay less than the minimum due on a credit card?

Paying less than the minimum due on a credit card will count as a default. Hence, issuers will charge a late payment fee on the outstanding amount apart from levying interest. 

What if I pay more than the minimum amount due?

By paying more than the minimum you are required to pay on your credit card, you avoid paying a higher interest. In addition, this helps reduce your outstanding balance. Paying more than the minimum due also reduces your credit utilisation ratio, which increases your credit score.


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