Credit card users are usually not recommended to keep their card bills outstanding. And when they have a pending bill, they have two options: to pay in full or to only pay the minimum outstanding.
When you pay the minimum due, you are meant to pay only 5 percent of the total bill while the remaining can be paid later. The flip side: your interest keeps accumulating. Additionally, the interest that you need to pay accumulates from the date of transaction and not from the last date of bill.
Although it is not a recommended plan of action, sometimes credit card users have little or no choice but to opt for the minimum due.
These are some of the scenarios wherein it is feasible to pay the minimum due instead of the full payment.
These are scenarios where paying the minimum due makes sense
I. Little time: You bought the merchandise towards the end of the billing cycle, leaving quite less time to clear your dues.
II. Can’t afford the full payment: Paying at least the minimum prevents late fees and negative marks on your credit report.
III. For a good credit score: Timely payments (even the minimum) help maintain a good payment history, which is important for your credit score.
IV. Waiting for cash inflow: You plan to clear your bill next month when there is expected cash inflow. Until then, you want to clear the minimum due.
VI. Other plans: You plan to use the credit card next month for something else. And during that time, you plan to clear your bills.
VII. Auto pay: You have put minimum due on the auto pay and therefore, clear the complete bill as and when the liquidity improves.
VIII: During initial period: During an introductory zero interest period, paying the minimum due will not lead to any interest charges. But you should plan to pay the balance before this culminates.
(Note: Using a credit card carries its own set of risks)
