What is the ‘Minimum Amount Due’ on a Credit Card? 

When you use a Credit Card, you receive a monthly statement that includes important details such as the total amount due and the minimum amount due. These two figures are essential to understanding your outstanding balance and maintaining an active Credit Card account. In this blog post, we will explain what ‘minimum amount due’ means, how it is calculated, why it is important and other details that you should know.

Meaning of minimum amount due on a Credit Card

Minimum amount due on a Credit Card can be defined as the least amount that mandatorily has to be paid to avoid late payment charges and to maintain a good repayment record in the long run. However, it is important to note that while paying just the minimum amount due allows your Credit Card account to stay active and prevents penalty fees, it does not stop interest from being accrued on the remaining amount. It only ensures that you are not penalised for non-payment in the billing cycle.

How is the minimum amount due calculated?

Most banks in India calculate the minimum amount due using one of the two ways given below:

• A fixed percentage of your outstanding balance, mostly 5% to 10%

• A flat fee, like ₹ 200, if the total outstanding balance is small.

Let us understand with an example:

Suppose the total outstanding balance on your Amazon Pay ICICI Bank Credit Card is ₹ 20,000.
ICICI Bank uses 5% to calculate the minimum amount due as:

Minimum amount due = 5% of ₹ 20,000 = ₹ 1,000

However, if you have any ongoing EMIs, unpaid dues from the previous month or fees like late payment charges or GST, they get added to the minimum amount due.

So, the minimum amount due on your Amazon Pay ICICI Bank Credit Card might look like this:

• 5% of fresh spends (spends made in the billing cycle)

• Full amount of any EMIs

• Past dues or unpaid minimum amounts

• Fees and GST (if applicable).

Why is paying the minimum amount due important?

Paying the minimum amount due is important because:

1. You avoid late payment fees

When you pay the minimum amount due by the due date, you can avoid late payment charges imposed by the Card issuer. This step protects you from penalty burdens and helps you maintain financial discipline.

2. Your credit score stays protected

Paying the minimum amount due on time reflects responsible credit behaviour. Credit bureaus treat it as a positive sign, which helps maintain your credit score. This ensures that the approval chances of your future loan or Credit Card applications remain unaffected.

3. Your Credit Card remains active

Paying the minimum amount due keeps your Credit Card account in good standing. Missing payments can result in your Card being temporarily blocked or even permanently deactivated by the Card issuer, along with restrictions being imposed on your spending limit or Card services.

Points to be considered when paying the minimum amount due

While paying the minimum amount due helps you avoid fees, it is important to note the following points:

1. Interest may continue to accrue

When you pay only the minimum amount due, interest is charged on the remaining unpaid amount. In most cases, this interest starts from the date you made the purchase. Over time, this can significantly increase the total amount you need to pay.

2. Gradual increase in balance

When only a small portion of the total amount is paid each month, the remaining balance continues to grow over time. Even if the Credit C

ard is not used further, interest will still be accrued on the unpaid amount.

3. Longer repayment period

Paying only 5% of the total amount due each month will extend the time it takes to fully repay your Credit Card balance. This means the repayment will continue over a longer duration than expected.

4. Higher Credit Utilisation Ratio

When a large portion of your credit limit is used and not fully repaid, your Credit Utilisation Ratio stays high. This may impact your credit score over time, as a lower ratio is generally considered more favourable.

Best practices to manage the minimum amount due smartly

1. Always pay the total amount due

This is the golden rule since it helps you avoid interest altogether and keeps your credit score healthy.

2. Use auto-debit instructions

You can set up auto-debit instructions for automatic payment of at least the

minimum amount due. This way, you are sure that you are never penalised for a missed due date.

3. Track your spending

It is always recommended that you monitor your Credit Card usage to ensure that you don’t overspend beyond your monthly capacity.

4. Use the minimum amount due only as the last resort

If you are facing a cash crunch, pay the minimum amount due, but aim to repay the rest soon. Do not make a habit of it.

5. Set reminders for due dates

You can set reminders for bill payment due dates, so that you do not miss making a payment and can stay safe from penalties and added charges.

Conclusion

You can smartly manage your Credit Card payments by knowing what the minimum amount due on your Credit Card means. Paying only the minimum amount due on your Credit Card might seem like a helpful option when you are low on funds but relying on it month after month can lead to increased expenses. Paying only the minimum amount due keeps your Credit Card account active but comes at the cost of significant interest charges, longer debt duration and potential adverse impact on your credit profile.

If you are financially stable, try to pay the total amount due each month. If not, at least try to pay more than the minimum amount due, so that you reduce the interest charged. Remember, your ICICI Bank Credit Card is a useful financial tool when used responsibly and managed well over time.

FAQs

1. What is the minimum amount due in a Credit Card statement?

It is the minimum amount you must pay by the due date to avoid late fees and maintain your Credit Card account in good standing.

2. What happens if I pay only the minimum amount due?

Interest will be charged on the remaining balance, which will increase your debt over time. You will also lose the interest-free period.

3. How is the minimum amount due calculated?

The minimum amount due is generally the sum of a percentage of the total amount due and the full amount of ongoing EMIs, fees and previous dues.

4. Is it okay to pay just the minimum amount due every month?

Not always, but you can do it occasionally. This is because routinely paying just the minimum amount due leads to interest build-up and longer repayment cycles.

5. Will paying the minimum amount due affect my credit score?

No, your score stays protected if you pay the minimum amount due. But a high Credit Utilisation Ratio and growing debt can impact your creditworthiness over time.