Credit Card Update: If you use a credit card, this news could be very important for you. Every month, credit card users receive a credit card statement. This statement contains a “Minimum Amount Due.” This means the bank warns them to pay this amount as soon as possible, otherwise their credit card will be blocked. If you do this quickly, your card won’t be blocked. It also impacts your credit score. Let’s explore this in detail.
What is Minimum Amount Due?
Minimum Amount Due is the minimum amount you must pay by the due date to avoid late fees or default. It’s typically 5% to 10% of your total outstanding balance. For example, if you have a card balance of ₹50,000, the Minimum Amount Due could be between ₹2,500 and ₹5,000.
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Can this lower your credit score?
For your information, if you pay the Minimum Amount Due on time, you won’t be considered a defaulter. Your payment record will remain clean, and your score won’t be immediately affected.
However, this can have long-term consequences. Paying only the minimum amount accrues interest on the remaining balance. This increases the total balance and increases your credit utilization ratio. If your card is frequently filled close to the limit, credit bureaus may interpret this as a negative signal, and your score may gradually decrease.
Disadvantages of Paying the Minimum Amount
It may seem easy at first, but consistently paying only the minimum amount can have serious consequences. An interest of up to 30-45% may be charged on the remaining balance, which can rapidly increase the debt. Furthermore, your credit profile may be weakened, making future loan or EMI approvals difficult. Banks may also hesitate to increase your credit limit, reducing financial flexibility.
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When is it appropriate to pay the minimum amount?
Paying the minimum amount is only appropriate in special circumstances, such as a sudden financial emergency or temporary cash flow problem. In such situations, it can be a way to avoid late fees and defaults.
To protect your credit score, always try to pay the full outstanding amount. If this is not possible, pay at least 50% or more to reduce interest charges and maintain a strong credit profile.
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Adarsh P
Adarsh Pal is a content writer at Timesbull Media. He specializes in writing news related to industry updates, the automotive sector, banking, telecommunications, the travel sector, and personal finance. Adarsh has previously worked with several digital media channels. He is skilled at presenting news accurately and disseminating information based on...
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