Minimum Due on Credit Cards - what is minimum due on credit card

What is Minimum Due?

The minimum due on credit card is the bare minimum bill amount that you have to settle each month to evade paying penalty charges. While some lenders fix a flat amount as 'minimum due,' some others calculate it as a certain percentage of the outstanding credit balance in a particular billing cycle.

If your bill amount for January is Rs.10,000, and the minimum due is 5% of your outstanding balance, then you just need to pay Rs.500 within the due date to avoid late payment charges. The minimum amount due is much lower than the total outstanding due. Convenient and affordable, right?

What's the Problem?

Well, many fail to recognize the danger hidden behind the garb of convenience. You might manage to escape the late fees by paying the minimum due, but the remaining outstanding amount will get heftier in the next billing cycle due to the addition of interest and taxes. Before you realize it, you might slip into a deadly credit card debt trap that can escalate rampantly, ballooning the debts out of proportion within a blink of an eye. Let's explore why.
Time Trouble

When you are making just the minimum payment on your credit card, you're basically telling your debt, "See you next month."

Credit card issuers usually set the minimum payment requirements at rock-bottom levels. As I've already mentioned, you'll either be required to pay a fixed amount or a percentage of the outstanding balance. Some credit card companies require you to pay barely 1% or 2% of the credit balance each month, along with any fees and accrued interest.

Making such tiny amounts of payment on time will definitely keep you safe from late fees, but you will hardly make any real progress on repaying your balance.In fact, if you keep paying the minimum due each month, it'll take you years to pay off the debt. Moreover, you can easily end up paying more than double the amount you had actually borrowed. You pay, and you pay, and you pay, but you never pay it off.

The best way to avoid this mess would be to settle all your current dues within the current billing cycle. If a tight budget impedes you from doing so, pay off as much as you can - paying at least the double of your minimum due will reduce the debt burden to a large extent.

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