Money Basics · Credit cards & CIBIL

The "minimum due" trap

Your credit card bill shows two numbers: "Total Outstanding" and "Minimum Amount Due." The Minimum Amount Due is a trap disguised as helpfulness.

What minimum due actually is

Typically 5% of the outstanding balance or ₹200, whichever is higher. Paying this keeps your account in good standing on paper, no late payment fee, no default on your credit report.

But on the remaining unpaid balance, the bank charges interest at 3–3.5% per MONTH from the transaction date, not the due date. That's 36–42% annually before tax, and unlike loan interest, credit card interest attracts 18% GST on top of it.

> The minimum due is the smallest payment that avoids a late fee. It is displayed first because it is the smallest number on the bill.

The math that should terrify you

Outstanding: ₹50,000. You pay minimum due: ₹2,500.

Month 2 balance: ₹50,000 – ₹2,500 = ₹47,500 + 3.5% interest = ₹49,162.

You paid ₹2,500 and your balance dropped by only ₹838. At this rate, paying minimums on ₹50,000 would take over 15 years and cost about ₹94,000 in interest. Nearly twice what you borrowed.

3.5% per monthcredit card interest. 42% a year as the issuer quotes it, before the 18% GST it charges on the interest

~49%What that actually costs a year once GST is added. No investment in India reliably beats it, which is why clearing card debt outranks every 'investment'.

The grace period trap

Another trap: once you carry a balance, you LOSE the interest-free grace period on ALL NEW purchases. Even new spends start accruing interest from day one until the entire balance is cleared.

The escape plan

1. Pay full outstanding amount this month, all of it

2. If you can't, pay as much as possible and stop using the card

3. Consider a balance transfer to a lower-interest personal loan

4. Once cleared, set up auto-pay for 100% of the outstanding amount

The minimum due exists to maximise bank profit, not to help you. Ignore it. Pay in full. Always.

Takeaway. Minimum due is a trap. It keeps your account active while letting interest compound at the 42% a year issuers quote. Nearer 49% once the 18% GST on that interest is counted. Pay the full outstanding amount every month.