Making Minimum Payment instead of Full Payment of Credit Card Bill. What your bank will charge? Read this before you make payment of Minimum amount shown in your credit card monthly statement.

Are you thinking to pay only the minimum amount shown in your bill instead of the total amount? Well, read this before doing that.

If you make payment of minimum amount due instead of total amount due, or any amount in less than the total due amount, then every bank charges with two types of fees:

1. Fee 
   The fee is fixed and this is applied once you make any payment less than the total due amount in your credit card bill.
2. Service Charges
   Every bank has a certain rate (percentage) in terms of service charges if you don’t make total payment of your credit card bill, which is applied to the outstanding amount (Total billed minus paid amount).

Here comes the demonstration of the charges if you make minimum payment instead of total payment.

Let’s say that your bill generation date is 5^th of every month & you have made only one retail transaction of Rs. 10,000 on 1^st Jan and rec bill of Rs. 10,000 in your bill of January that was generated on 5^th Jan & payment due date is 25^th Jan. The minimum payment is normally Rs 500 or 5% of the total amount whichever is higher. In this case it is also Rs. 500.

Now suppose you pay minimum amount only i.e. Rs. 500 on 25^th Jan. That means Rs. 9,500 remain outstanding from the total bill and will be included in next month’s bill which will be generated on 5^th Feb.

We assume the service chargers per year are 42%. (I am doing it on yearly charges, you may check these monthly also, just divide these charges by 12).

Now the service charges will be calculated on two amounts i.e. Rs. 10,000 & Rs. 9,500. Why? Because Rs. 10,000 remain outstanding for 24 days from 1^st Jan (transaction date) to 25^th Jan (Payment date, where you paid minimum only) and Rs. 9,500 were outstanding for 11 days from 25^th Jan (Payment date) to 5^th Feb (next bill generation date).

Here comes how the service charges are calculated:

Service charges for Rs 10,000 = 10,000 x 42% x 24 / 365 = 276.14
Service charges for Rs 9,500 =   9,500 x 42% x 11 / 365 = 120.24
Total service charges which will be billed in next bill are:   396.41

This same method will be applied to all transaction that you do using your credit card, and total service charges will be calculated. Also Late payment Fee is also applied which is normally Rs. 1000 or more. Therefore think again and make calculations fair enough before you go for minimum payment.

To know about the charges & fee applied by Each Pakistani Bank on Minimum payments, Click Here