What is a Minimum Payment?

A credit card holder is usually familiar with the term minimum payment since he or she receives a monthly credit card usage statement, also called the monthly bill which lists out the various purchases made by the card bearer using his or her credit card. The statement or document goes on to sum up the total of all these purchases and also calculates just exactly how much the credit card holder or customer has to pay or owes the credit card company. This is calculated after accounting for the rate of interest that must be levied on the total amount. Once this is done, the Credit Card Company then goes on to give the user the minimum amount that they must pay, which is usually some predefined percentage of the total amount. This is called the minimum payment that the user must make in order to retain usability of the credit card. If the payment made is lesser than this amount, or if even if the payment is equal to or above the minimum payment, but made at a date after the due date or the last date as specified on the credit card, then the credit card holder or customer is liable to be imposed with late fees or a penalty or even legal action can be taken against the person or card holder if that is allowed as per the guidelines of the credit card agreement that the card holder or customer must sign at the beginning of the credit card holder’s relationship or business with the credit card company – that is, when he or she obtained the credit card.

The minimum payment is a very important thing to consider when choosing a credit company over another. This is because even though some of the credit card companies offer a very low monthly payment per cent, they usually charge a large amount of interest. Thus what would end up happening is that people who use that particular credit card with that sort of payment scheme would end up having to pay a lot more money than other people on different payment schemes even though they have to do so only in smaller amounts but for a longer period of time.

Another reason why the minimum payment is of utmost importance is that everyone who has a credit card and wish to improve their credit limit or credit status must make sure that almost every other payment that they make should be at least a considerable amount of money greater than the minimum payment that the credit card company requires. This way, with each payment that is more than the minimum amount, the customer’s credit rating will improve and hence their credit limit can also improve allowing them to purchase more and more on the credit card each month. This is very advantageous since a person who does this will eventually build up enough credit that he or she will be eligible to apply for one of the premium cards which offer its users extra features and pay offs like the credit for air miles or lottery offers or even offers where with each dollar that they spend on the card, they can earn more credit.

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