Minimum Amount Due
Updated on October 4, 2023
The Minimum Amount Due refers to the smallest sum of money that a credit cardholder is required to pay to the credit card company by a specific due date in order to keep their credit card account in good standing. This concept is important for individuals to understand in order to manage their credit card finances effectively.
Understanding Minimum Amount Due in detail
Obligatory Payment – The Minimum Amount Due represents the mandatory payment that credit card holders must make to fulfill their financial obligations during the billing cycle. It’s usually a small percentage of the total outstanding balance on the credit card.
Statement Information – At the end of each billing cycle, credit card issuers generate a statement detailing transactions, total outstanding balance, due date, and the Minimum Amount Due.
Covering Interest and Fees – The Minimum Amount Due ensures payment covers part of the interest charges and fees accrued in the billing cycle, preventing default and extra charges.
Avoiding Late Payment Fees – Paying at least the Minimum Amount Due by the due date prevents late payment fees and potential credit score damage from late payments.
Interest on Remaining Balance – Paying only the Minimum Amount Due carries forward the remaining balance to the next cycle, accumulating interest and potential debt over time.