A credit card feature that many consider safe can quietly push users into heavy debt. Here’s why paying only the minimum due is risky and how to avoid the interest trap.
The most risky feature of a credit card is the Minimum Due Payment. This is the amount a bank mentions on your monthly statement, assuring you that paying it will help you avoid late fees. Typically, this amount is just 5% of the total bill. Many cardholders see this as relief and assume they have fulfilled their responsibility. But this is exactly where the bank’s real earnings begin. The remaining balance attracts hefty interest, which keeps increasing.When you pay only the minimum due, your total bill is not cleared. The outstanding amount can attract an annual interest rate ranging from 36% to 45%, along with GST and other charges. Gradually, you may find yourself paying money every month, yet your total outstanding keeps rising instead of falling.Many people remain trapped in this cycle for years without realising they are caught in an interest trap. For example: If your bill is ₹50,000 and you pay only ₹2,500 (5%), the remaining ₹47,500 will attract a monthly interest of 3-4%. Over time, this amount can easily double.Banks will never tell you that paying only the minimum due is harmful. The reason is simple: a significant portion of their profits comes from interest. When you don’t clear your full bill, the bank earns more. This is why credit card statements prominently highlight the minimum due amount. Often, even SMS alerts and app notifications display this figure at the top, subtly nudging customers to pay only that amount instead of the full balance.If you want to use your credit card wisely, follow this golden rule: pay your full bill every month. If, for any reason, you are unable to do so, make sure to pay more than the minimum due. Use credit cards for genuine needs, not to maintain a lifestyle image.Paying the minimum due does not immediately damage your CIBIL score, but its long-term impact can be risky. Continuous high credit utilisation using a large portion of your credit limit signals financial stress to lenders. As a result, you may face difficulties in securing home loans, car loans, or personal loans in the future.Disclaimer: The information provided here is based on general knowledge. News18 does not independently verify it. Readers are advised to consult a certified financial expert before making any financial decisions.
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In today’s times, credit cards have become a necessity for almost every salaried individual and middle-class household. Whether it’s shopping, travel, medical expenses, or meeting sudden financial needs, a credit card often comes to the rescue. However, if used incorrectly, this very convenience can turn into a serious financial burden.
