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Are you only clearing minimum dues on your credit card? Know how it affects you!
Posted on Wednesday, July 5th, 2023 | By IndusInd Bank
Paying the Minimum Amount Due (MAD) on your credit card bills can have adverse risks on your credit score and payment history. When you make the minimum payment on your outstanding balance, the bank will continue levying interest on the outstanding amount and on all new transactions until you pay the previous balance in full. Therefore, if you continue to pay only the minimum dues on your credit card, this will increase your credit utilization amount and negatively affect your credit utilization ratio (CUR). A CUR above 30% can negatively impact your credit score.
It is good to note that by making regular payments on your overdue account, you will get an interest-free credit period of up to 50 days with IndusInd Bank. But, if you only make Minimum Amount Due (MAD) payments, you will not receive this benefit.
Credit Card Interest
Credit card interest is usually calculated based on the annual percentage rate (APR), which is basically the interest rate that applies for the entire year. However, for monthly credit card payments, interest is calculated based on the monthly percentage rate (MPR). Both rates can vary from bank to bank, so it’s a good idea to check with your credit card issuer about the actual APR they charge for a particular card.
To avoid negative impacts on your credit score and to save money in interest payments, it’s best to pay off your entire balance each month. If that’s not possible, try to pay more than the minimum amount due each month to reduce your balance as quickly as possible.
If you’re struggling to pay off your credit card debt, here are some tips that can help:
- Create a budget: List down all your expenses and income. It will guide you to figure out the categories where you can cut back on your expenses and save money.
- Prioritise payments: Make sure you pay off high-interest debts first.
- Consider balance transfer: If you have multiple credit cards with high-interest rates, consider transferring the balances to a single card with a lower interest rate.
- Seek professional help: If you’re struggling to manage your debt, consider seeking help from a financial advisor or a debt counsellor.
Conclusion
In conclusion, paying only minimum dues on your credit card can have negative impacts on your credit score and lead to higher interest payments. It’s best to pay off your entire balance each month or at least pay more than the minimum amount due each month.
Interested in a lifetime free credit card? Then apply for an IndusInd Bank Online Credit Card in 4 easy steps. Simply, click the button below!
Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.
