Attention credit card users, know the disadvantages of minimum payment and how interest is calculated

If you make the minimum payment then you will not get the benefit of interest free period. You will not get the interest free period until the full payment is made.

The interest will continue till the balance payment is made.

in your country Credit Card ,credit card) has reached 67 million i.e. 67 million. Most of the youth have a credit card. It has now become a necessity as well as a thing of fashion. when you credit card bill payment ,credit card bill payment) then three options appear there. First total amount, second minimum amount and third other amount. Financial experts recommend that credit card users should make full bill payment every month within the due date. This is the right way to use it, so that your credit score will be good and there will be no financial liability. Many a times, in case of not being able to pay the full bill, it is advisable to pay the minimum amount in any case.

If you are not able to deposit the entire bill in any month, then in any case, deposit the minimum amount before time to avoid penalty. This is 5 percent of the total bill. However, the EMI amount will be additional. For example, if the EMI of a phone is Rs 5000 every month and you have shopped for 10 thousand in that month, then the minimum amount will be Rs 5500 (5000 + 500).

When will late payment be applicable?

It has been written on the website of Bank Bazaar, quoting the Reserve Bank, that there is an opportunity for credit card payment till three days after the due date. Even after this, if a cardholder does not make the payment, then late payment is charged. It is heavy charged. Late payment charge is included in the next bill.

What are the benefits of minimum payment?

  1. By making the minimum payment in the credit card before the due date, the card issuing company thinks that you are in some financial trouble. In this case, he keeps your card active and operative.
  2. No penalty and late payment charges are levied on depositing the minimum amount. In this situation only interest charge has to be paid.
  3. If the minimum payment is made on time, then the credit card company will not complain to the credit bureaus. This will not have a bad effect on your CIBIL. If you do not make this payment then your CIBIL score will deteriorate.

Let us understand this thing by example. Suppose the annual interest rate of the credit card is 36 per cent i.e. 3 per cent monthly. Billing date is 18th of every month and payment date is 6th of every month. (Data has been taken from the website of IDFC First Bank.)

Date of transaction Type of transaction Transaction amount
19 March Purchase ₹500 No interest is charged
31 March Purchase ₹500 No interest is charged
18 April Statement is generated ₹1000 The total amount due on 6 May is ₹1000. The minimum amount due is ₹50.
5 May Payment ₹50 You paid the minimum amount due, which is ₹50. The rest of the amount will incur interest.
16 May Purchase ₹1000 This amount will also incur interest.
18 May Interest ₹30 + ₹28.5 = ₹58.5 This interest will be added to your next bill.
18 May Statement is generated ₹58.5 + ₹950 + ₹1000 = ₹2008.5* This is the total amount you will need to pay on or before 6 June. The minimum amount due will be ₹100.42.

What are the disadvantages of late payment?

  1. The biggest advantage of credit cards is that you get an interest free period of up to 50 days. Even after the bill is generated, three weeks time is available for payment. If you make the minimum payment, you will not get the benefit of interest free period. You will not get the interest free period until the full payment is made. After that monthly interest is applicable on every transaction.
  2. This interest will be applicable till you make full balance payment. Overall, paying the minimum amount saves you from penalties and late payment charges. However, the interest will continue to accrue till you make the full payment.

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