Credit cards offer convenience and financial flexibility, but they also come with responsibilities—one of the biggest being timely repayment. Every month, your credit card statement shows a total outstanding amount and a minimum due amount. The minimum due is the smallest amount you need to pay to keep your account in good standing.
Many cardholders, especially in India, opt to pay only the minimum due, thinking it helps manage finances while avoiding penalties. This is particularly common among salaried individuals juggling multiple expenses, business owners managing cash flow, or those unaware of the long-term impact of partial payments.
However, what seems like an easy way to stay afloat can turn into a financial trap. Paying only the minimum due leads to:
- High-interest accumulation – Credit cards in India charge interest rates between 30-49% per annum, among the highest globally.
- Longer repayment periods – It could take years to clear even a modest balance.
- Credit score damage – Increased credit utilization and unpaid interest hurt your CIBIL score, making future loans costlier.
For example, let’s say Rohit, a software engineer in Bangalore, has a credit card bill of ₹50,000 with an interest rate of 42% per annum. The bank asks for a minimum payment of ₹2,500 (5%). If he continues paying only this amount, the remaining balance accrues interest. Within 12 months, his balance balloons to nearly ₹71,000—a 42% increase without spending another rupee!
Paying only the minimum may seem convenient, but it turns short-term relief into long-term financial stress.
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What Is the Minimum Payment?
The minimum due is the lowest amount a cardholder must pay to avoid late fees and account delinquency. It’s a percentage of the total outstanding balance, usually 5% of the total due (varies by bank).
How Banks Calculate the Minimum Payment
Most Indian banks follow a standard formula to determine the minimum due:
- 5% of the total outstanding balance or ₹200, whichever is higher.
- Any unpaid past dues from the previous month.
- Equated Monthly Installments (EMIs) on converted purchases or loans.
- Additional fees and charges (if applicable).
For example, if Neha from Pune has a bill of ₹20,000 on her HDFC credit card, the minimum due might be ₹1,000 (5%). However, if she has an EMI of ₹2,500, her minimum due rises to ₹3,500.
Why Credit Card Companies Allow Minimum Payments
While it may seem like banks are offering relief, there’s a strategic reason behind it:
- Profit from Interest: Credit card companies earn from high interest on unpaid balances. The longer you take to pay, the more they earn.
- Encouraging Spending: Minimum payments allow customers to keep using their cards, leading to more transactions and interest accumulation.
- Avoiding Defaults: By setting a low minimum due, banks ensure fewer accounts go into default, reducing bad debts.
In short, paying the minimum might keep your card active, but it also keeps you in debt longer and costs you significantly more over time.
What Happens If You Pay Only the Minimum?
Many Indian credit card users believe that paying the minimum due is enough to avoid financial trouble. While it helps you stay current on your payments, it also traps you in a long-term debt cycle. Let’s break down the real cost of this approach:
1. Increased Interest Charges: The Real Cost of Carrying a Balance
When you pay only the minimum, the remaining balance carries forward to the next month—along with a high interest rate. Credit card interest rates in India typically range between 30-49% per annum, far higher than personal loans.
Example
Say Amit has an outstanding credit card balance of ₹1,00,000 with an interest rate of 36% per annum. His minimum due is ₹5,000 (5%). If he only pays this amount, the remaining ₹95,000 accrues interest. Within a year, his debt will grow to nearly ₹1,35,000, and he will have paid over ₹40,000 in interest alone!
2. Longer Repayment Period: How It Could Take Years to Clear Debt
Credit cards are designed so that if you pay only the minimum, it can take years to clear the balance. This is because your payments mostly cover interest, not the principal amount.
Example
Suppose Priya has a credit card balance of ₹50,000, and she continues paying just the minimum ₹2,500 every month. With a 42% interest rate, it could take her 5-6 years to clear this debt—even if she doesn’t use the card again!
3. Higher Credit Utilization: Impact on Your Credit Score
Your credit utilization ratio (CUR) is the percentage of your available credit that you’ve used. A high CUR—above 30%—can negatively impact your CIBIL score, making future loans more expensive.
Example
If Rakesh has a credit card limit of ₹1,20,000 and an outstanding balance of ₹90,000, his credit utilization is 75%. Paying only the minimum keeps his balance high, damaging his credit score and making it harder for him to get a home or car loan at a good interest rate.
4. Debt Cycle Trap: How Minimum Payments Keep You in Debt
Minimum payments create a never-ending cycle of debt. Since banks charge compound interest, the longer you take to pay, the more you owe. Over time, you may end up paying double or triple the original amount.
Example
Sunita took a vacation and spent ₹75,000 on her credit card. She planned to repay in small chunks, paying only the minimum due of ₹3,750 per month. But after two years, she realized she had paid over ₹90,000—yet still owed a significant amount!
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How to Pay the Minimum Due Without Financial Risks
If you must pay the minimum due, here are ways to reduce financial risks and avoid unnecessary charges:
1. Set Up Auto-Pay to Avoid Late Fees
- Many Indian banks charge late payment fees between ₹400-₹1,300 per month.
- Enabling auto-debit ensures you never miss a payment.
2. Pay More Than the Minimum to Reduce Interest
- Even an extra ₹1,000-₹2,000 on top of the minimum can reduce your interest burden significantly.
- Paying in full saves you from finance charges.
Example
If Deepak has a ₹30,000 balance and pays only ₹1,500 (minimum), he’ll pay ₹16,000 in interest over 3 years. If he increases his payment to ₹5,000 per month, he’ll clear the debt in 6 months with just ₹2,500 in interest.
3. Make Bi-Weekly Payments to Shorten the Repayment Period
- Instead of one monthly payment, make two smaller payments every 15 days.
- This lowers interest accumulation and reduces your repayment period.
Example
If Neha owes ₹60,000 and her minimum due is ₹3,000, paying ₹1,500 every two weeks can reduce total interest and help her clear the debt faster.
Hidden Charges You Must Watch Out For
Credit card issuers often impose hidden fees that can quickly add up if you’re unaware. Here are the top ones:
1. Compounded Interest: How It Increases Over Time
Credit card interest compounds daily, meaning each day’s unpaid balance accrues interest. Even a small balance left unpaid can snowball into a massive amount over time.
Example
If you have an outstanding balance of ₹40,000 at a 42% annual interest rate, the daily interest accrual is ₹46. Over a year, that’s ₹16,790 in interest!
2. Late Payment Fees: Consequences of Missing Even One Payment
If you miss a payment, banks charge a late fee of ₹400-₹1,300, depending on your outstanding balance.
Example
If Rahul misses his ₹3,500 minimum payment, the bank charges a ₹1,000 late fee. This increases his balance to ₹4,500, which then accrues interest—costing him even more.
3. Over-Limit Fees: Charges When You Exceed Your Credit Limit
If you spend beyond your credit limit, banks charge an over-limit fee of ₹500-₹1,000.
Example
If Anjali’s credit limit is ₹1,00,000 and she spends ₹1,05,000, she may be charged an extra ₹1,000 over-limit fee.
4. Annual Fees & Other Costs: Extra Charges That Add to Debt
Many premium credit cards charge an annual fee of ₹1,000-₹5,000. Additional costs may include:
- Cash Withdrawal Fees: Up to 3% of the withdrawn amount.
- Foreign Transaction Fees: Around 3.5% of international spending.
- Card Replacement Fees: ₹100-₹500 for a new card.
Smart Strategies to Avoid Credit Card Debt
Credit card debt can spiral out of control if not managed wisely. To stay financially secure, you need a strategy that helps you avoid excessive interest while maintaining good credit health. Here’s how you can keep credit card debt in check:
1. Pay in Full Each Month: The Best Way to Avoid Interest
The simplest and most effective way to avoid credit card debt is to pay off your entire balance every month. This way, you won’t have to worry about interest piling up.
Example
If Ramesh spends ₹20,000 on his HDFC credit card and pays the full amount before the due date, he pays ₹0 in interest. However, if he pays only ₹1,000 (minimum due), the remaining ₹19,000 starts accumulating interest at 3-3.5% per month, leading to a much higher repayment amount.
2. Use a Budget: Track Spending and Prioritize Credit Card Payments
A well-planned budget helps ensure that credit card bills don’t exceed your income. Prioritize high-interest debts while managing other essential expenses like rent, groceries, and savings.
Quick Tip:
Use the 50/30/20 budgeting rule:
- 50% of income for necessities (rent, utilities).
- 30% for wants (entertainment, dining out).
- 20% for savings and debt repayment.
3. Balance Transfer Cards: How 0% APR Offers Can Help
Some banks in India offer 0% balance transfer credit cards, allowing you to shift your existing credit card debt to a new card with no interest for a limited period (usually 3-12 months). This gives you time to clear your dues without accumulating more interest.
Example
Shruti had a credit card balance of ₹80,000 with a 36% annual interest rate. She transferred it to an SBI balance transfer card offering 0% APR for 6 months. This saved her nearly ₹14,400 in interest, giving her breathing room to repay her debt faster.
4. Debt Snowball vs. Avalanche Method: Two Proven Ways to Clear Debt
If you have multiple credit cards, these methods can help you clear debt faster:
- Debt Snowball: Pay off the smallest debt first while making minimum payments on others. This builds momentum.
- Debt Avalanche: Pay off the highest interest rate debt first to reduce overall interest costs.
Example
Rajesh had three credit cards with balances:
- ₹10,000 (18% interest)
- ₹50,000 (36% interest)
- ₹20,000 (24% interest)
Using the avalanche method, he focused on clearing the ₹50,000 debt first, saving more on interest over time.
How to Lower Your Credit Card Interest Rate
High-interest rates make debt harder to repay. But did you know you can negotiate a lower APR with your bank? Here’s how:
1. Contact Your Bank for a Lower APR
Banks value long-term customers who make regular payments. If you’ve been a responsible credit card user, call customer support and request a lower interest rate.
Example
Asha had an ICICI credit card with a 42% annual interest rate. She had a good payment history and asked the bank to lower her rate. They reduced it to 32%, helping her save thousands in interest.
2. Negotiate Better Terms if You Have a Good Payment History
- If you’ve never missed a payment, you have a strong case for negotiating a lower rate.
- Some banks may offer a temporary lower interest rate if you’re struggling with payments.
3. Explore Other Low-Interest Credit Card Options
Consider switching to a low-interest credit card with a lower annual percentage rate (APR). Banks like SBI, HDFC, and Axis Bank offer cards with lower APRs for selected customers.
What to Do If You’re Struggling with Payments
If you’re unable to pay your credit card bill, don’t panic—there are solutions to help you regain control of your finances.
1. Request a Hardship Plan from Your Bank
Some banks offer temporary relief programs for customers facing financial hardship. These may include:
- Lower interest rates for a few months
- Waived late fees
- Flexible repayment plans
Example
During the pandemic, banks like HDFC and SBI offered moratorium options for credit card holders struggling with payments.
2. When to Consider Credit Counseling or a Debt Consolidation Loan
If your debt is out of control, a credit counseling agency can help you create a structured repayment plan.
Alternatively, taking a personal loan at a lower interest rate (10-15%) and using it to clear your high-interest credit card debt (36-49%) can be a smart move.
Example
Vikas had a total credit card debt of ₹2,00,000 at a 40% APR. He took a personal loan at 12% interest and used it to pay off his credit card, saving over ₹40,000 per year in interest.
3. Understanding Your Rights if You’re Unable to Pay
In India, banks cannot harass you for non-payment. If you’re struggling:
- Contact your bank immediately to discuss options.
- Avoid loan sharks—taking informal loans at high interest rates will worsen your situation.
- Know your legal rights—as per RBI guidelines, collection agents must follow ethical practices.
Conclusion: Stay Ahead & Avoid Financial Traps
- Paying only the minimum due keeps your account active but increases your overall debt.
- The best way to avoid credit card interest is to pay the full amount every month.
- If full payment isn’t possible, always pay more than the minimum and use smart strategies to reduce interest.
- Be proactive—set a budget, negotiate lower interest rates, and explore balance transfer options.
By following these strategies, you can stay financially secure, maintain a strong credit score, and avoid unnecessary financial stress.
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FAQs
What happens if I only pay the minimum due on a credit card?
If you pay only the minimum due, the remaining balance carries over to the next billing cycle, accumulating interest. Over time, this increases your debt, prolongs repayment, and may impact your credit score if your credit utilization remains high.
Do you get charged interest if you pay the minimum?
Yes, paying only the minimum due means the remaining balance accrues interest, typically at a high rate. The longer you take to pay off the full balance, the more interest you’ll end up paying.
What happens if I pay only the minimum due on an HDFC credit card?
For HDFC credit cards, paying the minimum due helps you avoid late fees but does not stop interest from accruing on the remaining balance. The interest can be as high as 3.5% per month (or more), leading to significant debt accumulation over time.
What happens if we pay the minimum due on an SBI credit card?
SBI credit cards also charge interest on the remaining balance if you pay only the minimum due. Additionally, new purchases may attract interest from the transaction date since you lose the interest-free period.
What happens if we pay the minimum due on a credit card? (Reddit Perspective)
On Reddit, many users share experiences of falling into a debt trap due to paying only the minimum due. Common concerns include high interest accumulation, difficulty in clearing debt, and a lower credit score due to increased credit utilization.
If I pay the minimum credit card payment, do I get charged interest?
Yes, you will be charged interest on the remaining unpaid balance. Credit card interest rates are usually high, so carrying a balance for too long can make repayment costly.
If I pay the minimum due on my credit card, will it affect my credit score?
Yes, it can affect your credit score negatively. High credit utilization and ongoing debt can lower your score over time, making it harder to get loans or credit approvals in the future.
What if I pay only the minimum amount due on an ICICI credit card?
ICICI charges interest on the remaining unpaid balance if you pay only the minimum due. Your total outstanding amount will keep increasing due to compounding interest, and you may also lose the interest-free period for new purchases.
What is the minimum amount due in an HDFC credit card?
The minimum amount due on an HDFC credit card is usually 5% of the total outstanding balance or a fixed minimum amount (e.g., ₹200), whichever is higher. It helps avoid late payment fees but does not prevent interest charges on the remaining balance.