Minimum amount due calculation
In the cycle closing process, the minimum amount due (MAD) is the amount that the cardholder must pay by the statement due date to avoid overdue charges.
MAD calculation strategy
There are three strategies for calculating the MAD. All three strategies use a MAD percentage value, but this value is defined slightly differently, depending on the strategy.
- Strategies 0 and 1 use the
minimum_value
field, defined in the transaction categories, for the MAD percentage. - Strategy 2 uses the
Percentage for calculating the minimum payment amount
program parameter for the MAD percentage.
The strategies are defined as follows.
Minimum payment calculation method | Description |
---|---|
0 | The Pismo platform applies the MAD percentage to individual transactions. The following formula is applied to each transaction: 100% of outstanding balance from previous cycle + (MAD percentage × balance of debit transactions from current cycle) The results are added up to get the MAD. |
1 | The Pismo platform applies the MAD percentage to individual transactions. The following formula is applied to each transaction: MAD percentage × balance of outstanding debit transactions from current and previous cycles The results are added up to get the MAD. |
2 | The Pismo platform applies the MAD percentage to the total balance (sum of transaction amounts), instead of to individual transactions.* In this strategy, the MAD includes the full overdue and over-limit amounts. The Percentage for calculating the minimum payment amount program parameter represents the MAD percentage in this case, and it's applied only to the remainder of the total current balance. So, the formula is:(current balance - overdue amount - over-limit amount) x Percentage for calculating the minimum payment amount + overdue amount + over-limit amountNote: If the result of this calculation is greater than the total amount due (TAD), the MAD is considered to be the TAD. |
*The calculations for Strategy 2 must be adjusted if there are full-amount transactions involved.
How to select a MAD calculation strategy
In the Pismo Control Center, set Minimum payment calculation method
to 0, 1, or 2.
If you select Strategy 0 or 1, you must configure the MAD percentage for the transaction categories of all your debit transaction types. See How to configure the MAD percentage for a transactions category. Note: If you don't configure the MAD percentage for a category, it defaults to 0.
If you select Strategy 2, use the Control Center to set the value of Percentage for calculating the minimum payment amount
to the MAD percentage.
How to configure the MAD percentage for a transaction category
Use either Create transaction category or Update transaction category to set the MAD percentage in the minimum_value
field of the transaction category. One category can apply to any number of transaction types.
If
minimum_value
is set to 1 (100%), this overrides the value in thePercentage for calculating the minimum payment amount
program parameter. See Full-amount transactions for more information.
Example transaction categories
The following table demonstrates how MAD percentages could be assigned to transaction categories.
Category ID | Description | MAD percentage |
---|---|---|
1 | Internal | 5% |
2 | Financial | 5% |
3 | Non-financial | 5% |
4 | Withdrawal | 5% |
5 | Installment purchase | 100% |
Example transaction types
Your transaction types could be assigned to transaction categories as follows. See How the program uses configurable entities for more information.
Transaction type ID | Description | Transaction category |
---|---|---|
101 | Purchase | 2 |
102 | International purchase | 2 |
123 | Withdrawal | 4 |
201 | Payment | 2 |
404 | International fee | 3 |
405 | Revolving interest | 3 |
407 | Withdrawal fee | 3 |
112 | Installment purchase | 5 |
Full-amount transactions
In some cases, you might not want a debit transaction to be subject to refinancing. In such cases, the full amount of the transaction must be included in the MAD, so this kind of transaction is called a full-amount transaction. To make a transaction full-amount, you set the minimum_value
field of its transaction category to 1. (Note that this makes all transactions in that category full-amount.)
For Strategies 0 and 1, having full-amount transactions in the cycle doesn’t change the calculation of the MAD, because the formula is applied to each transaction separately. Since the MAD percentage for a full-amount transaction is 100% (minimum_value
= 1), applying the formula results in the entire amount of the transaction being included in the MAD.
For Strategy 2, however, if the current cycle includes full-amount transactions, the calculation is first done without including the full-value transactions. That is, the amounts of the full-amount transactions are subtracted from the current balance and the resulting adjusted balance is used in the formula. Next, the amounts of the full-amount transactions are added to the result returned by the formula to get the actual MAD. Second example in Strategy 2 examples shows how this works.
Examples
Strategy 0 example
This example applies when Minimum payment calculation method
is set to 0.
Cycle 1 statement
(Assume MAD percentage = 5%.)
Transaction ID | Transaction type | Transaction balance | Minimum payment per transaction |
---|---|---|---|
1 | 101 | $200 | 0.05 × 200 = $10 |
2 | 123 | $100 | 0.05 × 100 = $5 |
3 | 407 | $2 | 0.05 × 2 = $0.10 |
Totals | $302.00 | $15.10 |
Previous balance: $0.00
Current balance: $302.00
SUM(minimum per transaction): $15.10
Minimum amount due (MAD): $15.10
Cycle 2 statement
Assume MAD percentage is 5%.
Transaction type | Transaction ID | Transaction balance | Minimum payment per transaction |
---|---|---|---|
101 | 4 | $100 | 0.05 × 100 = $5 |
123 | 5 | $100 | 0.05 × 100 = $5 |
102 | 6 | $100 | 0.05 × 100 = $5 |
101 | 7 | $0 | 0.05 × 0 = $0 |
407 | 8 | $2 | 0.05 × 2 = $0.10 |
404 | 9 | $2 | 0.05 × 2 = $0.10 |
Totals | $304 | $15.20 |
Previous balance: $302.00
Current balance: 302.00 + 304.00 = $606.00
SUM(minimum per transaction): $15.20
If no payments were made:
Minimum amount due (MAD): 302.00 + 15.20 = $317.20 (previous outstanding balance + MAD)
Strategy 1 example
This example applies when Minimum payment calculation method
is set to 1.
Cycle 1 statement
(Assume MAD percentage = 5%.)
Transaction ID | Transaction type | Transaction balance | Minimum payment per transaction |
---|---|---|---|
1 | 101 | $200 | 0.05 × 200 = $10 |
2 | 123 | $100 | 0.05 × 100 =$5 |
3 | 407 | $2 | 0.05 × 2 =$0.10 |
Totals | $302 | $15.10 |
Previous balance: $0.00
Current balance: $302.00
SUM(minimum per transaction): $15.10
Minimum amount due (MAD): $15.10
Cycle 2 statement
(Assume MAD percentage = 5%.)
Transaction ID | Transaction type | Transaction balance | Minimum payment per transaction |
---|---|---|---|
4 | 101 | $100 | 0.05 × 100 = $5 |
5 | 123 | $100 | 0.05 × 100 =$5 |
6 | 102 | $100 | 0.05 × 100 =$5 |
7 | 101 | $0 | 0.05 × 0 =$0 |
8 | 407 | $2 | 0.05 × 2 =$0.10 |
9 | 404 | $2 | 0.05 × 2 =$0.10 |
Totals | $304 | $15.20 |
Previous balance: $302.00
Current balance: 302.00 + 304.00 = $606.00
SUM(minimum per transaction): $15.20
If no payments were made:
Minimum amount due (MAD): 15.10 + 15.20 = $30.30 (Outstanding balance of the previous and the current cycle x MINIMUM PERCENTAGE
for each transaction category)
Strategy 2 examples
These examples apply when Minimum payment calculation method
is set to 2.
First example
First, the overdue amount is calculated:
overdue amount = MAD from previous cycle - credits of type 7253 (Payment received) from current cycle.
If the result is less than 0, set the overdue amount to 0.
If the outstanding balance is greater than the available limit, the over-limit amount must also be calculated:
over-limit amount = outstanding balance - available limit
Otherwise, the over-limit amount is 0.
Now, the formula is used to calculate the MAD:
MAD = (current balance - overdue amount - over-limit amount) × MAD percentage + overdue amount + over-limit amount
Cycle 1 statement
(Assume Percentage for calculating the minimum payment amount
= 10%.)
Transaction ID | Transaction type | Transaction balance |
---|---|---|
1 | 101 | $200 |
2 | 123 | $100 |
3 | 407 | $2 |
4 | 112 | $300 |
Total | $602 |
Previous balance: $0.00
Current balance: $602.00
Minimum amount due (MAD): 602.00 x Percentage for calculating the minimum payment amount
= 602.00 x 0.1 = $60.20
Cycle 2 statement
(Assume Percentage for calculating the minimum payment amount
= 10% and available limit = $1000.)
Transaction ID | Transaction type | Transaction balance |
---|---|---|
5 | 101 | $100 |
6 | 123 | $150 |
7 | 102 | $200 |
8 | 112 | $300 |
9 | 201 (payment) | ($100) |
Total | $650 |
Previous balance: $602.00
Current balance: 602.00 + 650.00 = $1252.00
Overdue amount: $0 (since the payment of $100 was greater than the MAD for the previous cycle)
Over-limit amount: 1252.00 - 1000.00 = $252.00
Calculate MAD:
(current balance - overdue amount - over-limit amount) × Percentage for calculating the minimum payment amount
+ overdue amount + over-limit amount = (1252.00 - 0 - 252.00) x 0.1 + 0 + 252.00 = 352.00
Minimum amount due (MAD): $352.00
Second example
The calculation is different if the account is overdue and there was an over-limit on the previous statement. In this case:
MAD = (current balance - overdue amount - current debits amount) x Percentage for calculating the minimum payment amount
+ overdue amount + current debits amount. Note: In the following example, this condition only occurs in cycle 3, so the above formula is only used in that cycle.
Cycle 1 statement
(Assume Percentage for calculating the minimum payment amount
= 10% and account credit limit = $1000.)
Transaction ID | Transaction type | Transaction balance | Full-amount? |
---|---|---|---|
1 | 101 | $100 | No |
2 | 123 | $380 | No |
3 | 407 | $125 | No |
4 | 101 | $100 | No |
Total | $705 |
Total credit $0
Previous balance: $0
Current balance: $705.00
Overdue amount $0
Over-limit amount $0
Calculate MAD:
(current balance - overdue amount - over-limit amount) × Percentage for calculating the minimum payment amount
+ overdue amount + over-limit amount = (705.00 - 0 - 0) x 0.1 + 0 + 0 = 70.50
Minimum amount due (MAD): $70.50
Cycle 2 statement
(Assume Percentage for calculating the minimum payment amount
= 10% and account credit limit = $1000.)
Transaction ID | Transaction type | Transaction balance | Full-amount? |
---|---|---|---|
5 | 101 | $100 | No |
6 | 123 | $150 | No |
7 | 102 | $200 | No |
8 | 101 | $100 | No |
9 | 112 | $20 | Yes |
10 | 7253 | ($70.50) | No (credit) |
Total | $499.50 |
Total credit $70.50
MAD from previous statement $70.50
Previous Balance: $705.00
Current balance: 705.00 + 499.50 = $1204.50
Overdue amount: $0
Over-limit amount: $204.50(current balance - overdue amount - over-limit amount) × Percentage for calculating the minimum payment amount
+ overdue amount + over-limit amount = (1204.50 - 0 - 204.50) x 0.1 + 0 + 204.50 = 304.50
Calculate MAD:
Since one transaction (for $20) is configured to use 100%, this value must be removed from the outstanding balance when performing the calculation. The formula is applied to this adjusted balance, and $20 is added to the result to get the actual MAD:
Step 1: Adjusted balance = 1204.50 - 20.00 = 1184.50
Step 2: Apply the formula. (adjusted balance - overdue amount - over-limit amount) × Percentage for calculating the minimum payment amount
+ overdue amount + over-limit amount = (1184.50 - 0 - 204.50) x 0.1 + 0 + 204.50 = 302.50
Step 3: Add the full-amount transactions to the result. 302.50 + 20.00 = 322.50
Minimum amount due (MAD): $322.50
Cycle 3 statement
(Assume Percentage for calculating the minimum payment amount
= 10% and account credit limit = $1000.)
Transaction ID | Transaction type | Transaction balance | Full amount? (100%) |
---|---|---|---|
11 | 101 | $100 | No |
Total | $100.00 |
Total credits $0
Minimum previous statement $322.50
Previous balance: $1204.50
Current balance: 705 + 499.50 + 100 = $1304.50
Overdue amount: $322.50
Over-limit amount: $322.50
Calculate MAD:
(current balance - overdue amount - current debits amount) x Percentage for calculating the minimum payment amount
+ overdue amount + current debits amount = (1304.50 - 322.50 - 100) x 0.1 + 322.50 + 100 = 510.70
Minimum amount due (MAD): $510.70
Updated 22 days ago