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When you receive a credit card bill, you have the option to pay two amounts. One is the total outstanding amount and the other is the minimum amount due. If you are short of cash there is a tendency to pay the minimum amount due on credit card.
But this has a limited benefit. If you are in the habit of doing this regularly, your credit card bill could see a spiralling. Read on to know more.
What is ‘minimum amount due’?
The minimum amount due is 5% of the total outstanding amount.
If you have converted any payment on your card to EMI, that amount is also added to the minimum amount.
Any unpaid balance from the previous billing cycle is also added to the minimum amount
The benefit of paying the minimum amount
By paying the minimum amount, you can keep your credit active, i.e. you can continue to use the card for the total available credit limit (barring the amount converted to EMI)
Besides, the bank will not classify your payment as a ‘default’ in the credit record if you pay the minimum amount due. This will ensure that your credit score is protected.
When you pay the minimum amount the rest of the balance gets carried forward and interest is charged on that amount
The minimum amount increases for every month that you delay full payment, as the balance amount of one month is added to the minimum amount of the next month
Credit card interest rate ranges from 35-40% on an annual basis.It is calculated daily on the outstanding amount, i.e. the unpaid amount. You can use Axis Bank's EMI calculator to know more.
The interest is charged from the date of the purchase, and not the end of the billing cycle. Hence, every time you pay only the minimum balance you incur interest charge on that amount from day one and effectively lose out on the benefit of
the credit-free period.
Your available credit limit is reduced to the extent of amount not repaid. Hence, you may not be able to swipe your credit card as per your needs.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
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This is to inform you that by clicking on the hyper-link/ok, you will be accessing a website operated by a third party namely Such links are provided only for the convenience of the Client and Axis Bank does not control or endorse such websites, and is not responsible for their contents. The use of such websites would be subject to the terms and conditions of usage as stipulated in such websites and would take precedence over the terms and conditions of usage of www.axisbank.com in case of conflict between them. Any actions taken or obligations created voluntarily by the person(s) accessing such web sites shall be directly between such person and the owner of such websites and Axis Bank shall not be responsible directly or indirectly for such action so taken. Thank you for visiting www.axisbank.com
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