Should we always pay Credit Card minimum due?

Should we always pay Credit Card minimum due?

When your credit card bill comes & minimum due is the most common things highlighted on the page, what is the first thing that comes in your mind. For those who are not frequently using credit card needs to understand that whenever a Credit card bill comes there are 2 components hinghlighted on the very First page, a) Total Due, b) Minimum due. Let us dig a little deaper & understand what does these means. Total due is the Total amount of due for the Last billing cycle of the credit card & Minimum due is the amount which can be paid to continue the credit card with us with some limited benefits.

Let's take an example for better understanding. Suppose your Total due: ₹100,000 is for the bill cycle & Minimum due: ₹5,000. Now what will you do?

So now you will think, "Ok I’ll pay ₹5,000 this month & I’m done.” This is the most dangerous thing which you need to understand. Have you ever wondered what can be the impact. You’ve just bought yourself expensive debt to yourself, because when you don't clear the full bill. This is what happens:

• Your interest-free period disappears

• Interest will start accumulating on the unpaid balance.

• Keep paying only the minimum and that ₹100,000 can take months or even years to clear.

• Your credit card limit will start decreasing

So what's the Solution? Just apply some useful habits

Don't compare credit cards by rewards alone also look at the interest calculation and what happens when you carry a balance because a card offering 5% cashback means very little, when you're carrying a balance at a 30/40% interest rate. RBI actually should apply rule for banks to warn customers about this exact trap.

Hope the blog will help you in taking a sensible & more meaningful decision

by
Narendra Kr Surana
Volatility Coach & a Wealth Architect
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