What’s The MAD (Minimum Amount Due) In A Credit Card?

There are many times when you majorly tend to conduct additional buys than required because you hold a credit card of SBI IRCTC Rupay credit card, HDFC Millennia credit card, IRCTC SBI Platinum credit card, Standard Chartered bank Digismart, Citibank Rewards, etc. As an outcome, when a credit card outstanding bill comes in, it tends to become tough for you to repay the amount because the expenditures that you conducted might have surpassed the money that you earned. 

To your rescue, issuers allow you the choice to make payment of the MAD (minimum amount due), which means you can make payment partly on your overall outstanding bill in place of paying the entire amount in one shot. This partial amount that you must mandatorily pay is known as the minimum payment due or the minimum amount due. In scenarios where you as a user just pay the minimum amount, the interest constituent is levied just on the rest of the balance. However, regardless of all the advantages, it is still advised for you to make the payment of the whole bill in a single shot. You would wonder, why so? Read on to understand. 

What is meant by the minimum amount due?

The minimum amount due or minimum payment due is a small fraction of the overall outstanding bill due that you require paying mandatorily to the financial institution in case you are unable to pay the whole bill outstanding. Explained here are some of the crucial features that you must of aware of – 

Also Check: IRCTC SBI Platinum Credit Card

How the minimum repayment due is computed?

Usually, the minimum repayment due or the minimum amount due is a fixed amount, which is fixed at 5 per cent of the overall outstanding balance as computed on the billing date when the statement is issued. However, there is a specific case where the listed fees may even get included in your minimum amount due – 

·       If you as a user make the decision to convert your purchases into EMI, the interest constituent is added to your minimum amount due (MAD). 

·       If there’s any unpaid minimum balance from the past month’s billing cycle. 

Do not pay just the minimum amount due (MAD) on a credit card. Read on the understand why?

While it is recommended for you as a card user to pay the minimum repayment due, it must just happen when it’s possible to pay the whole outstanding balance. Making payment of the whole outstanding balance is one of the prudent practices that you must ensure to follow and here’s why – 

·       If you make payment of the whole balance before the due date, you easily can avoid the advantage of witnessing a period of interest-free credit for as high as two months. Additionally, you can even get an additional time period of as high as three weeks from the issue date of your card statement to the outstanding balance clearing date. 

·       Having paid just the minimum repayment due will not provide you with any period of interest-free credit. However, in the case you have paid your outstanding amount on the credit card in totality, you would get a period of interest-free from your bank. In contrast, if you pay just your minimum amount due, you may have to pay the additional interest constituent on the outstanding balance from the purchase date. 

·       Also, it is necessary for you to note that in the case you settle for just the minimum amount due for a few months, the interest constituent on the outstanding due will accumulate over the time period. 

What will happen in the case you pay just the minimum amount due for a long time period?

It is possible that you just pay your minimum repayment due for a long time period. However, it is not recommended that you do this. Mentioned here are some of the crucial consequences of doing this – 

·       Credit limit will get lowered to an amount that you have not repaid. 

·       Zero interest-free credit frame

·       Pay high interest constituent on outstanding due

Credit repayment status – Do’s and don’ts you must be well-versed with 

Whether it’s your first credit card or your last card, it is crucial that you ensure to maintain a good credit usage as well as repayment status. To further assist you do so, read on the list of distinct things you must, and you must not do to remain away from landing in a debt trap – 

Dos	Don’ts
Pay your bills in full and on time	Late payment of the outstanding dues will result in high interest constituent
Purchase a credit card of your requirement and use the same effectively to get reward points	Keep a continuous and thorough check on all credit card deals and offers like discounts, rewards and others.
Make use of your card to mitigate exigency expenditures	Credit cards provide borrowed funds, so avoid overspending
Keep your card safely with yourself	Losing your card might result in fraudulent transactions or misuse of the card
Effective usage can ameliorate your score	Improper usage can impact your score negatively

What are the top advantages of paying just the minimum amount due?

This is the amount that you as a user must mandatorily pay to the issuer as per the billing cycle to keep your credit account active. Here’s why you as a credit card user must prefer to pay just the MAD (minimum amount due). 

·       Making payment of the minimum repayment due makes sure that you must pay just the interest whenever you require it without incurring any additional fees. 

·       If you as a user fail to make the credit card bill payment timely for a regular time period, you may be reported to the bureau for irregular credit repayment habits. However, in the case you have managed to pay at least the minimum amount due on time, you may not be reported by the lender to the bureau. 

·       Credit score is impacted directly by your repayment behaviour. Not being able to make the card balance payment on time impacts your score negatively. However, if you as a user have made at least the minimum amount payment by the due date, then your score will not get impacted to a great extent.

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