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    Why Paying Credit Card 'Minimum Payment Due' Does Not Help

    Sometimes, it just happens that we make a lot of impulse purchases throughout the month and when we receive the credit card bill, the cash flows are stretched already. In such scenarios, we would not be always able to pay the total outstanding amount in entirety. Also, any balance that remains unpaid for the month accumulates high interest. In times like these, the “Minimal Amount Due” or famously MAD, can be our saviour. Minimum Payment means that it is a small fraction of the total outstanding amount that you can pay in case you are not able to make full payments. So, what is minimum amount due or the minimum payment amount? What is its advantage? Read on to find more about the same.

    Advantages of Paying the Minimum Amount Due:

    Here are some of the advantages of paying the minimum due every month.

    • The Minimum Amount Due (MAD) is the amount that you pay to the concerned credit card company on or before the due date to keep your credit card active and to keep the card account operative.
    • Making the Minimum Amount Due Payment will ensure that you will have to pay only the interest when required. There will be no penalty or late payment charges.
    • Your Credit Card Company or credit card issuing bank will not report you as irregular to credit bureau if you make Minimum Amount Due Payments on time.
    • If you do not make credit card payments on time, your credit score will be adversely affected. To avoid this, you can pay at least the minimum amount due as mentioned in your credit card bill on time.

    Calculation of Minimum Amount Due:

    As is the case with many credit card companies, the Minimum Amount Due is generally 5% of the balance outstanding as calculated on statement date. If you have converted your purchases to EMI or if you have enabled the EMI balance transfer option, the same will also be added to your Minimum Amount Due. Also, if there are any unpaid Minimum amount from the previous credit card statement cycle, it will also be added to the minimum due for current month.

    Let us consider an example for minimum amount due calculation and make some assumptions for the same.

    • The fee for late payment is Rs. 500.
    • The credit card statement is generated at the 5th of every month.
    • Interest rate is charged at 3% every month
    • The payment is to made on or before 26th of every month.

    The following example will show how the minimum amount due is calculated.

    Date Transaction Details Transaction Amount Remarks

    July 15

    Purchase

    Rs. 10, 000

    Interest Free Credit period.

    August 5

    Statement

    Rs. 10, 000

    Due date is August 26. Minimum Amount Due is Rs. 500 (5% of Rs. 10, 000)

    August 20

    Payment

    Rs. 500

    Minimum Amount Due Payment

    August 25

    Purchase

    Rs. 15, 000

    No interest free credit period

    September 5

    Interest

    Rs. 682

    On purchase

    September 5

    Service Tax

    Rs. 95

    Service tax on interest

    September 5

    Statement

    Rs. 25, 278

    Minimum Amount Due is Rs. 1263.90 (5% of Rs. 25, 278)

    September 26

    No payment is made. Late payment fee will be applicable.

    September 30

    Late Payment Charges

    Rs. 684

    Including service charges.

    October 5

    Interest Charges

    Rs.. 778

    October 5

    Service Tax

    Rs. 109

    Service tax on interest

    October 5

    Statement

    Rs. 26, 848

    Minimum amount due Rs. 2,542 including the previous due of Rs.1, 263.9

    The fact that late payment penalty was not charged in August since the minimum amount has already been paid is obvious. Also, the interest has been charged on the amount unpaid from the purchase date and not from the due date or statement date. Hence, by making the minimum due payment, you cannot avoid the high interest. Also, if you do not make the minimum payment by due date, late payment penalty will also be charged.

    Disadvantages of Paying only the Minimum Amount Due:

    • One major advantage of making regular, full payments of your credit card outstanding is that you get interest free credit period for up to two months. Not only that, you will also get up to three weeks’ time to clear the outstanding amount after statement is issued.
    • You will not be offered any interest free credit period if you have paid only the Minimum Amount Due (MAD) and not the credit card outstanding in full. Rather, you will be charged interest amount from the date of purchase.
    • The interest amount will also keep accumulating till you settle the dues. So, even if you have paid the Minimum Amount Due and have avoided paying any penalty for late payment, you will not be able to enjoy the benefits of interest free credit period.

    Consider an illustrations to see how interest is charged on credit cards and how paying just the Minimum Amount Due every month will lead to accumulation of interest,

    Date Transaction Details Transaction Amount Remarks

    July 15

    Purchase

    Rs. 5, 000

    Interest Free Credit period

    July 30

    Purchase

    Rs. 5, 000

    Interest Free Credit period

    August 5

    Statement

    Rs. 10, 000

    Due Date - August 26

    Minimum Amount Due is Rs. 500 (5% of Rs. 10, 000)

    August 8

    Purchase

    Rs. 8, 000

    Interest Free Credit period

    August 20

    Payment

    Rs. 10, 000

    Full Payment

    August 25

    Purchase

    Rs. 15, 000

    Interest Free Credit period

    September 5

    Statement

    Rs. 23, 000

    For bills on August 8 and August 25

    Due Date is September 4

    Minimum amount Due (Rs. 1, 150)

    September 12

    Purchase

    Rs. 10, 000

    Interest Free Credit period

    September 26

    Payment

    Rs. 1, 150

    Minimum Amount Due paid

    Interest Free credit period for August 8, 25 and 12 will be reversed.

    Interest will be charged from the date of purchase.

    September 30

    Purchase

    Rs. 5, 000

    No Interest Free Credit period

    October 5

    Interest

    Rs. 1, 679

    Interest Charged for all purchases from date of purchase.

    October 5

    Tax

    Rs. 235

    Service tax on interest

    October 5

    Statement

    Rs. 38, 764

    Statement Amount Rs. 23,000 - Payment of Rs. 1, 150 + Purchases Rs. 15, 000 + Interest Amount Rs. 1, 679 + Service Tax

    From the above example, it can be understood that for bills on August 8, no interest was charged in the statement dated September 5. However, because only the Minimum Amount Due was paid, the interest free credit period was taken back and interest was charged.

    Can you just keep paying the Minimum Amount Due Every Month?

    Yes, you can keep your credit card active by paying just the Minimum Amount Due every month. But, you will have to pay high interest charges and also, there will be no interest free credit period. Just remember that the less you pay of the outstanding amount, you will be made to pay more in interest. Credit card debts are very expensive and you must always make credit card payments in full. When there’s a financial contingency or cash flow crisis in a particular month, you can have just paying the Minimum amount due as an option. You will avoid credit score hits and late payment charges by paying the Minimum Amount Due - but, this can only be a short term arrangement.

    In conclusion, you will have to cut down on expenses and revisit your budget if you constantly find yourself being able to pay only the Minimum Due amount. In case the credit card interest has become too much to bear, you can tru personal loans or balance transfer options.

    Credit cards have revolutionised the way people look at debt in India. For many, they are emergency ATMs that dispense plastic money in need. All is well while using the card, but when it comes to repaying the used amount, many cardholders tend to neglect. They either do last minute payments or pay only minimum amount due, pushing the remaining balance to the subsequent months. While both are valid things to do, one should know the consequences of such activities.

    Starting with making credit card payment on the last date. Most of us have the habit of making last minute payments. It may not be a good idea when it comes to credit card payment. Unlike other utility bill payments, credit card bill payments, through a few channels, don’t get credited instantly. Banks typically take 2-3 days to process the payment based on the mode of payment. Hence, by making a payment on the due date you will end up receiving a late payment penalty. You may assume that you have made the payment on time, but due to the processing time involved in credit card payment processing, your payment gets delayed. The receiving bank also considers the date on which the payment is received, not the date on which you have made the payment. Therefore, to avoid late payment fee, make sure to pay your credit card bill 2 to 3 days before the due date.

    Coming to the minimum amount due (MAD) payment. There are some genuine instances wherein we cannot afford to pay the entire bill amount. In such instances, we don’t have any other option except to pay the minimum amount due. But if you’re doing it without knowing what exactly happens by paying the MAD alone, you must know the consequences.

    Once you have paid the minimum amount due on your credit card, the card issuer will start levying interest on the remaining amount. Further, any subsequent purchases made on the card also attract interest till the amount is settled in full. This will increase your credit card bill with the added interest rates and the respective taxes.

    Hence, in order to avoid paying additional amount on your credit card, make sure to pay the bill in full and before the due date.

    Why Paying Credit Card 'Minimum Payment Due' Does Not Help Reviews

    • Oriental Bank of Commerce Credit Card
      "Average service"
      0.5 2.0/5 "Expected more"
      I have been using my saving account with oriental bank of commerce for long time, there service is not up to the mark, and there branch service is not good they are not properly assisting me well and even there mobile application is not properly updated , i am not happy with their service, i need to maintain 3000 minimum ,they use to charged me message charges,and even atm charges and they use to charges me alot.
      Was this review helpful? 0
      , gurgaon
      Reviewed on Jan 16, 2019
    • SBI Cards Credit Card
      "Average service"
      0.5 3.0/5 "Satisfactory"
      I have been using SBI credit card from past one year, they have charged me annual fee up to 499 ,but there is waived off option available in this card, and i am not happy with the credit limit they have given me too low credit limit, like i am using from past one year still they have not increase my credit limit, but there offers is good.
      Was this review helpful? 0
      , gurgaon
      Reviewed on Jan 16, 2019
    • Bank Bazaar Credit Card
      "Good service"
      0.5 5.0/5 "Blown Away!"
      I have been using bank bazaar service from past one year, and i came to know about bank bazaar service through on line, there service is good, i have been keep on checking my credit score through bank bazaar and even i have applied for financial product through them, and i have been both website and mobile application,it is easy to access, overall service is good.
      Was this review helpful? 0
      , gurgaon
      Reviewed on Jan 16, 2019
    • HDFC Bank Credit Card
      "Good card"
      0.5 4.0/5 "Great!"
      I have took credit card with HDFC bank recently, they have not charged me annual fee in this card , as it is life time free credit card, and i am happy with the credit limit they have charged me in this card, the reason for choosing this card is that they give good cash back to me,there overall service is good.
      Was this review helpful? 0
      , gurgaon
      Reviewed on Jan 16, 2019
    • SBI Cards Credit Card
      "Good card"
      0.5 3.5/5 "Pretty good"
      I have been using Sbi credit card for a while, hey have charged me annual fee in this card, but there is waived off option available in this card, if i spend certain amount then my annual fee will get waived off, and i am happy with the credit limit they have given me in this card, they have charged me up to 50,000 as an limit, and there are no much good offers.
      Was this review helpful? 0
      , bangalore
      Reviewed on Jan 16, 2019
    • Axis Bank Credit Card
      "Average card"
      0.5 2.0/5 "Expected more"
      I have taken credit card with Axis bank for an while, i am not happy with the credit limit they have given me in this card ,like i have expected up to 50,000 above,but they have given me up to 40,000,which is too less , i am not happy with the credit limit , and for that reason i have not started using this bank credit card, they have not charged me annual fee as it is life time free credit card.
      Was this review helpful? 0
      , bangalore
      Reviewed on Jan 16, 2019
    • ICICI Bank Credit Card
      "Process is good"
      0.5 5.0/5 "Blown Away!"
      ICICI Bank is overall good for the credit card and the banking services are good. There are good offers and the credit limit is good as well. I am satisfied with the services. The transactions are smooth and easy and in all it has been a very good process.
      Was this review helpful? 0
      , new delhi
      Reviewed on Jan 15, 2019
    • HDFC Bank Credit Card
      "Satisfactory"
      0.5 5.0/5 "Blown Away!"
      I hold a credit card with HDFC Bank and the credit limit is good on the card. There are offers on the card, and it is a smooth process. The customer services and response is good and there are no issues while using the card too. Overall satisfactory.
      Was this review helpful? 0
      , new delhi
      Reviewed on Jan 15, 2019
    • ICICI Bank Credit Card
      "Happy with the services"
      0.5 5.0/5 "Blown Away!"
      I bank with ICICI Bank for the credit card and the banking experience is good. The customer services and response is good as well. There are good deals and there are no charges for the card. The statements are sent to me on time and in all a good process till date.
      Was this review helpful? 0
      , jorhat
      Reviewed on Jan 15, 2019
    • HDFC Bank Credit Card
      "Average experience"
      0.5 3.0/5 "Satisfactory"
      HDFC Bank credit card experience is not up to the mark. They need to send me clear statements and there has to be more clarity on it. The credit limit is good and there are good offers as well. The services has to be improved. In all a average experience.
      Was this review helpful? 0
      , new delhi
      Reviewed on Jan 15, 2019
    • ICICI Bank Credit Card
      "Satisfactory process"
      0.5 4.0/5 "Great!"
      ICICI Bank provided good customer services and they are responsive as well. They have offered me a good credit limit on the credit card and there are good offers on the card. The statements are also clear and sent to me on time. In all no hassles.
      Was this review helpful? 0
      , new delhi
      Reviewed on Jan 15, 2019
    • ICICI Bank Credit Card
      "Excellent"
      0.5 5.0/5 "Blown Away!"
      ICICI Bank is good overall in the credit card offers and deals. The customer services and response is good. The credit limit is good and there are no hassles while using the card. The statements are also sent to me on time. In all there is no inconvenience.
      Was this review helpful? 0
      , jaipur
      Reviewed on Jan 15, 2019
    • HDFC Bank Credit Card
      "Average"
      0.5 4.0/5 "Great!"
      I bank with HDFC Bank for the credit card as well. The net banking is no user friendly as could not make the payments with ease. The credit limit is of 1.5 Lakh. They could provide better services online and offline when compared to the other banks.
      Was this review helpful? 0
      , haridwar
      Reviewed on Jan 15, 2019
    • ICICI Bank Credit Card
      "Overall good experience"
      0.5 4.0/5 "Great!"
      I hold a credit card with ICICI Bank and the customer services are good. The credit limit is fine and there are no hassles while using the card. The offers are good and the charges are normal too. The card is acceptable every where. Overall no issues.
      Was this review helpful? 0
      , haridwar
      Reviewed on Jan 15, 2019
    • ICICI Bank Credit Card
      "Hassle free"
      0.5 4.0/5 "Great!"
      ICICI Bank has also offered me a credit card and the benefits are good. The card is accepted every where. The credit limit is good and there are no issues in the overall experience. The statements are also on time and till date I faced no issues.
      Was this review helpful? 0
      , chennai
      Reviewed on Jan 15, 2019
    • SBI Cards Credit Card
      "Till date no hassles"
      0.5 5.0/5 "Blown Away!"
      I bank with State Bank of India, and the customer services are good. They are responsive as well. The credit limit is good too. There are good benefits and offers on the credit card. Overall till date it has been a smooth process. The billing is also good.
      Was this review helpful? 0
      , new delhi
      Reviewed on Jan 15, 2019
    • SBI Cards Credit Card
      "Good overall"
      0.5 5.0/5 "Blown Away!"
      I bank with State Bank of India for the credit card and the process is excellent. They have given me a good credit limit and there are no issues till date. The billing is a also clear and the statements are sent to me on time as well. It has been nice to bank with them.
      Was this review helpful? 0
      , jorhat
      Reviewed on Jan 15, 2019
    • SBI Cards Credit Card
      "Good in all"
      0.5 4.0/5 "Great!"
      My credit card is with State bank of India. The bank has been good till date in the overall services. The transactions are smooth and I have not faced any inconvenience while using the card. The statements are also sent to me on time and it is clear.
      Was this review helpful? 0
      , haridwar
      Reviewed on Jan 15, 2019
    • YES Bank Credit Card
      "Features are good"
      0.5 5.0/5 "Blown Away!"
      YES Bank is good overall in the credit card services. The online banking is good and there are no issues to complete my transactions. The credit limit is to my satisfaction too. The statements are clear and sent to me on time. The overall process is also good.
      Was this review helpful? 0
      , new delhi
      Reviewed on Jan 15, 2019
    • Standard Chartered Bank Credit Card
      "Experience is good"
      0.5 5.0/5 "Blown Away!"
      I hold a credit card with Standard Chartered Bank. The customer services and response is good. There are no hassles in the process. I am okay with the features of the card and the credit limit is fine. Overall it has been good and the billing is good too.
      Was this review helpful? 0
      , new delhi
      Reviewed on Jan 15, 2019
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