Credit Cards : What is Minimum Due Amount?.

** Credit card issuers allow users to pay a minimum due, which is typically a fraction of the total amount due.

Paying this converts the credit card to a loan facility at a high rate of interest.

** The balance can be repaid in smaller instalments over a period of time.

The user is not charged a penalty for late fees once the minimum due amount is paid.

** The unpaid amount is carried forward to the next billing cycle and interest is levied on this amount.This is called the revolving credit facility.

The duration between the first day of billing cycle and the day that the payment is due is interest-free period.

This benefit is not available for subsequent purchases till the outstanding amount is cleared.

** The interest component over the remaining outstanding period tends to inflate the cost of purchase for the user.

Courtesy: Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre and Arti Bhargava.

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