The minimum payment is one of the alternatives that users of credit cards have to cancel their debt.
It is an amount that the bank establishes to make cash without having to pay the total of the account statement of the card that we used to pay for our purchases.That is, the minimum payment is an amount less than the total of the account statement received that involves partially canceling a debt, which allows us to avoid entering the bank’s list of defaulters.It is good to know that the amount that the bank establishes for the minimum payment is not random, but is established by BN Bank.
The last modification became effective on January 4, 2013, where a new adjustment was established that increases the minimum payment of the debt on credit cards to 1.5 percent. This was aimed at preventing users from continuing to borrow, so over time, the values were an upward trend.
For example, from September 1, 2011 to January 3, 2012, the adjustment was 0.5%. From January 4, 2012 to January 3, 2013 it was 1%.
Finally, as of January 4, 2013, the 1.5% top percentage came into effect.
It is important to clarify that financial institutions that issue credit cards are obliged to comply with the new rules, even though broadcasters may freely determine the minimum payment “the payment must always be the highest”.
In the following image you can see how our bank tells us the total amount to be paid and the minimum payment amount
When is the minimum payment convenient?
As a first note we affirm that it is not advisable to opt for the minimum payment when paying the credit card because it is a modality that increases the debt considerably.
However, if it is true that in the only case we can say that it is advisable to do so, it is in case of having financial difficulties and so that the bank does not increase the debt. That is, paying the minimum and not leaving the total statement of account unpaid.
That said, it is important to clarify that it is a methodology that significantly increases the debt to unpayable amounts that can be extended for years multiplying, a situation that can lead us to enter the unfortunate segment of the defaulters.
In addition, entering the circuit of those who opt for this scheme inevitably leads to continued debt because each month we will choose to refinance the debt and only see the small payments, but we can never cancel this if we continue in this vicious circle.
What happens if I do not pay or the minimum card?
Debtor delinquent, that is the qualification that can fall to who does not pay even the minimum of your credit card.
Default interest applies to cardholders who do not even make the minimum payment. But it’s not all, they also charge us ordinary interest.
It is good to know that default interest is applied on the minimum payment amount. If 90 days pass without paying some of your debt, the bank will charge late interest on the total of your debt. What a problem you will have in that case because the debt will go up a lot.
In this case you will pay the ordinary interest (calculated by multiplying the average daily balance by the monthly ordinary interest plus the late interest rates (multiplying the past due balance by the monthly interest rate).
The total interest to be paid will be the sum of both.
What happens if we pay double the minimum?
As we just explained, the minimum payment is a small portion of the credit card statement that allows us to pay to keep the financing current and to continue current.
Therefore, it is very important to always pay as much as possible and prevent the debt from growing. While the ideal scenario is that you become a “totalero”, it is clear that if your economy does not allow it, you end up paying the minimum.
In case you have chosen to make your payments, you must understand that the monthly payments you make are not only for the consumptions made with the credit card, but also include interest, VAT (calculated on interest), commissions and interest , and of course the payment to the capital.
Now, the problem is that when you only pay the minimum, what is paid first are the associated expenses (interest, VAT, commissions) and finally the capital.
For this reason it is important that you pay more than the minimum so that you can reduce your debt monthly.
Minimum payment plus months without interest
The possibility of making the minimum payment and making purchases in months without interest (MSI) exists, although not all banks allow it, and it depends a lot on the customer profile that is you.
In general, purchases without interests are not subject to the minimum payment and penalize when the payment is not complete or in many cases this scheme is canceled.
Despite this, we have seen that many banks have begun to apply this system of minimum payment plus months without interest .
It is a new concept that applies to the account statement and is usually an amount much higher than the simple minimum payment , since in addition to not canceling the total, the bank is financing those monthly payments.
Minimum payment not to generate interest
This terminology is not entirely correct, given that they are two different things.
On an account statement, the following concepts usually appear:
- Minimum Payment : this is the amount that must be paid in order to avoid breaches with the bank. But the balance does generate interest. So, we see that there is no way to make the minimum payment to avoid paying interest (except when the minimum payment exceeds the debt balance, in this case, we do not pay the minimum but the balance).
- Payment not to generate interest : this is the total value of the debt and charges during the period. By paying them in full, we generate no interest.
- Balance to date : it is everything we have purchased at the date the account statement was generated. But possibly there are charges that do not have their due date in the next payment, but in later ones.