Credit Card Payment: Are You Getting Total Balance After Paying The Minimum Amount?

Credit Card Payment: Are You Getting Total Balance After Paying The Minimum Amount?

The use of credit cards is getting popular day by day, especially because of the interest-free credit period, online discounts, and cash backs. However, there are many things people get confused about.

In reality, you may face some issues with this interest-free credit period. What if you are not spending much? Are you still getting the total balance after paying the minimum amount with the credit card?

In this article, we are going to discuss credit card minimum amount payment. So, you don’t have to face any issues in the future. Let’s start with what is the minimum amount due.

What is The Minimum Amount Due?

You know how impulsive purchases can be effective for us. Especially, when we have a high amount due and we don’t have that much amount on saving account. The interest could be higher than expected.

In that case, the Minimum Amount Due plays a key role, it could be your savior. The minimum amount due is a small amount you pay from the outstanding balance when you don’t have enough balance on your account. The minimum amount due is 5% of your outstanding balance.

Calculation of Minimum Amount Due

We have mentioned that the minimum amount due is 5% of the outstanding balance for most credit card companies. If you have any EMI on your card, it will be also added to the minimum amount due. If you have an unpaid minimum amount, it will be generated on the next month’s cycle.

Advantage of Paying Minimum Ammount

Finally, you know what is the minimum amount due on a credit card. However, there are some advantages you can get by paying the minimum amount. Let’s find out.

● Keeping active a credit card is essential. When you are paying the minimum amount, you are keeping the card active.

● By paying a minimum amount on your credit card, you can avoid late payment fees.

● You will be able to protect your credit card score when you are paying a minimum amount.

● Your bank will not take your payment as the default credit record.

Risk of Paying Minimum Ammount

With the advantages, there are some disadvantages of paying a minimum amount. Let’s find out what are the risks of paying the minimum amount due.

● The interest amount of credit card is around 35-40% per year, and it is calculated on the outstanding amount.

● When someone is paying the minimum amount on the credit card, the rest of the balance gets carried forward. So, the bank will charge interest on that amount.

● When you are purchasing something, the interest starts from that day. However, it does not end on the billing period. So, it will hurt the benefits of the credit-free period.

Conclusion

Finally, you know how credit card payment works. As you see credit card charges a minimum amount annually, you cannot get the total balance on your account. On the other hand, you have to keep your card active. Make sure you are using your credit card wisely to avoid further issues.