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In today’s time, your income may be fixed but you will get many options to pay. Credit card ends this difference between limited income and great desire. Even if someone explains a million things to you, but when you set your heart on something expensive, then a credit card comes in handy to fulfill that wish.
While spending, we probably forget that its bill (Credit Card Bill) will also come and you will have to pay it too. Credit card companies understand very well the distance between your heart, mind and pocket. This is the reason that these companies give you a convenience, which they do the minimum amount due.
Minimum due in the bill tempts you
If you look carefully at your credit card bill, you will see the full amount of the bill. Along with this, the option of Minimum Amount Due will also appear in the next field. Minimum amount means that if you are not able to pay the entire bill, then you can pay even that amount.
Pay minimum due and don’t rest in peace
If you make minimum due in a month’s bill, then it should not be considered enough. This does not mean that you are relieved of the credit card bill. It is a kind of debt trap. The money that the company takes from you every month in the name of minimum due, is consumed only in interest and file charges. Your principal amount remains the same.
what a hell minimum dew
Minimum Amount Due is actually a part of your total bill. This gives you relief from additional penalties like credit card late payment fees. But you will have to pay a charge at the rate of about 3 to 4% per month on the entire bill. Accordingly, you will pay around 40 to 50 percent interest annually. That too will have to be paid from the day you make the purchase.
Calculation of Minimum Amount Due
Normally the minimum amount due is 5% of your total outstanding. But this amount may vary from bank to bank’s credit card. If the total outstanding amount in your credit card bill is more then it can be less than five percent of that amount. If the amount of the total bill is less then it can also be around five percent.
Is there any harm in this?
Yes. Paying only the minimum amount due on your credit card bill can land you in a debt trap. Because, this amount is used for the payment of interest and not for the payment of principal amount. Interest will continue to be charged till you clear your due completely. Whereas you have to pay up to 50 percent interest. Which can be kept in the category of crime.
CIBIL report is bad?
Often banks tell you that paying the minimum amount due does not affect your CIBIL score. But experts say that when your loan amount instead of decreasing remains or increases, then the CIBIL score is bound to deteriorate. Not only this, the bank will identify you as a customer who is short of liquidity. It is possible that such a customer may get trapped in the vortex of debt in the coming days.
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