I am opening a new credit card and am not sure exactly what this clause means:
Your Minimum Payment Each Month.
Each billing cycle, you must pay at least the Minimum Payment Due shown on your monthly statement by its Payment Due Date. We will calculate it as follows:
(1) If the Principal Balance (defined below) is less than $15, the Minimum Payment Due equals the Statement Balance shown on your monthly statement.
(2) If the Principal Balance is $15 or more, the Minimum Payment Due equals the greater of $15 or the total of:
- 1% of the Principal Balance,
- Any interest charges billed on the monthly statement (excluding any interest charges that accrued during prior billing cycles on a deferred interest balance that ended during the billing cycle covered by the statement),
- Any Minimum Interest Charge,
- Any Returned Payment Fee, and
- Any Late Payment Fee.
The “Principal Balance” equals the Statement Balance on your monthly statement minus any interest charges, Minimum Interest Charge, Returned Payment Fee, and Late Payment Fee that is incurred during the current billing cycle.
If we so elect, your Minimum Payment Due may also include any amount that, at the time of billing, is past due and/or over your credit line.
In certain instances your Minimum Payment Due may be less than the total fees and interest assessed that billing cycle. At any time you may pay more than the Minimum Payment Due up to the full amount you owe us. However, you cannot “pay ahead”. This means that if you pay more than the required Minimum Payment Due in any billing cycle or if you make more than one payment in a billing cycle, you will still need to pay the next month’s required Minimum Payment Due by your next Payment Due Date.
In my naive understanding of how credit cards work I would expect my actual bank account to be charged the how much I spent in the billing period. The two cases confuse me a bit and any clarification would be appreciated.
For what it’s worth, I don’t really plan on buying more on credit than I can repay at the end of billing period.