What is the “minimum due” on a credit card? Minimum due refers to the minimum payment a cardholder must make before the statement due date.
That said, there are important nuances that you need to consider, including what happens if you only pay the minimum due, and how only paying the minimum due impacts credit scores.
In this article, we’ll cover these nuances while also answering common questions we receive about credit card repayment.
This article is part of our free series on applying for US credit cards, including how to get a US credit card with an ITIN number, which you can access here.
Feel free to use the table of contents to jump ahead to the sections most relevant to you.
Table of Contents
- What Is Minimum Due in Credit Card?
- Frequently Asked Questions
- Ready to Open Accounts With Banks in the USA?
What Is Minimum Due in Credit Card?
Minimum Due, in credit card repayment terms, refers to the payment obligation of a cardholder each billing cycle. The minimum due is a percentage of the total outstanding balance. Additionally, the balance beyond the minimum payment requirement will incur interest charges each month.
When cardholders choose not to pay the minimum due, it results in a delinquent account. As a result, late fees and other penalties will apply. With this in mind, you should always practice sound credit card debt management and whenever possible, paying off credit card balances is recommended.
Payment and debt management also apply to term loans, which you can learn more about by accessing our free article linked here.
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Frequently Asked Questions
Below are six of the most common questions we receive from people looking into what is the minimum due in credit card statements. If you have further questions you would like to ask our team, don’t hesitate to get in touch.
What Is the Minimum Amount Due (MAD)?
Minimum Amount Due (MAD) refers to the minimum payment that a cardholder is required to make before the statement due date. Any amount above the minimum amount due that is not paid will incur interest at the rate set by the credit card issuer. At a minimum, it’s important to pay the minimum amount due. Not paying the minimum amount due on a credit card will result in late fees, penalties, and damage to the cardholder’s credit score. These penalties, fees, and damages to credit scores can also impact the type of high-limit credit cards that are available to you.
What Will Happen If I Pay Only the Minimum Amount Due for a Few Months?
If you only pay the minimum amount due for a few months on your credit card, the total outstanding balance on your credit card will increase. Importantly, your credit card issuer will charge interest on the total outstanding balance.
This means that each month, you will incur additional charges that increase the total balance on your credit card. If you then continue to use your credit card, this additional usage will also increase the total balance on your credit card. As a result, the total interest charges that you are charged each month will continue to increase as well.
With this in mind, whenever financially possible, it is always best to pay off as much as you can on your credit card each month. This ensures you continue to reduce the total interest charged and reduce your credit utilization score, which can impact your creditworthiness.
What Happens If You Pay “Minimum Due of Credit Card”?
If you choose to pay the minimum due on a credit card, what happens next is the credit card issuer will calculate the total outstanding balance on the card. Then the applicable interest rate will be applied to the total outstanding balance. If you continue to use the credit card in the future and continue to pay the minimum due, the total outstanding balance will continue to increase. As a result, the interest charges incurred each month will also grow, as a function of the outstanding balance.
Does Minimum Due Affect Credit Score?
While only paying the minimum due does not affect your credit score immediately, it does directly impact your credit score over time. This is because only paying the minimum due results in your total credit utilization score increasing, assuming you continue to use your credit card for additional purchases. Importantly, credit utilization is a key consideration when credit bureaus assess an individual’s creditworthiness.
Is It Good to Pay Minimum on Credit Card?
No, it is not considered “good” to pay the minimum amount due on a credit card. By paying the minimum on a credit card, you will incur interest charges on the remaining outstanding balance that you are carrying month-to-month. Additionally, if you continue to only pay the minimum balance, and continue to use your card for purchases, your outstanding balance will continue to grow.
Can I Pay More than the Minimum Amount Due?
Yes, you can pay more than the minimum amount due on your credit. In fact, if you are in a position to do so, you may want to consider paying the entire outstanding balance on your credit card. This way, you do not incur interest charges on payments, which effectively allows you to use the credit card without ever paying interest.
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