Credit cards have become a popular way for Indians to pay for everyday expenses and shopping, thanks to cashback offers, reward points and other benefits. However, using a credit card means borrowing money from the bank, which must be repaid within the stipulated time.
Missing a payment deadline or overlooking certain repayment rules can lead to interest charges, penalties and additional costs. While credit cards offer convenience, understanding how billing cycles, due dates and repayment terms work is essential to avoid unnecessary expenses.
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Minimum Due Rule In Credit Cards
Many people think that once they pay the minimum due on their credit card, they are set for the month. Paying the minimum due on your credit card may help you avoid late payment charges, but it does not mean your debt is under control.
The minimum due amount is usually a small part of your outstanding balance. This is the smallest amount that you must pay to keep your credit card active. Across lenders, this amount can vary between 5-10% of the total balance.
By paying the minimum dues, you may be able to avoid late penalties and keep your credit score intact, based on the lender's terms and conditions. In most cases, it also prevents higher-interest rates on the remaining balance.
Simply paying the minimum due amount does not mean your remaining debt will not continue to attract the interest rate.
On your account, there is a statement balance of Rs 50,000, with no new spending and no fees. The interest is 3.5% a month on the balance left after each payment and the minimum due is 5% of the total due.
- Month 1: Your bill is Rs 50,000.
- You pay the minimum due of Rs 2,500.
- The remaining Rs 47,500 attracts 3.5% interest.
- Your balance becomes Rs 49,162.50.
In month 2, the minimum due on Rs 49,163 becomes Rs 2,458. The balance after payment becomes: Rs 46,704. Again, you must 3.5% interest on this remaining balance.
Over 12 months, you will pay nearly Rs 29,426 in minimum dues.
Total interest charged: about Rs 18,211
Balance still owed: about Rs 38,785
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This means your debt keeps spiraling over time, even if you pay your credit card minimum dues every month. As a result, you must prepare in advance about your plans to repay any debts and avoid fresh spending on the same card as it can make your situation worse.
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