The Minimum Due Trap
Credit card minimum due is designed to keep you in debt. While it seems convenient to pay just 5% of your balance, this small payment can trap you in a cycle of debt for years, costing you multiple times your original spending in interest charges.
How Minimum Due Works
Minimum due is typically calculated as:
- 5% of outstanding balance, OR
- ₹100-500 (whichever is higher), PLUS
- All fees and charges (late fees, over-limit fees, etc.)
Real Cost of Minimum Payments
Let's see the shocking impact of paying only minimum due on a ₹50,000 balance at 3% monthly interest:
| Payment Type | Time to Pay Off | Total Interest | Total Paid |
|---|---|---|---|
| Full Payment | Immediate | ₹0 | ₹50,000 |
| ₹10,000/month | 6 months | ₹4,500 | ₹54,500 |
| ₹5,000/month | 13 months | ₹11,200 | ₹61,200 |
| Minimum Due (5%) | 15 years | ₹1,40,000 | ₹1,90,000 |
⚠️
Shocking Reality
Paying only minimum due on ₹50,000 takes 15 years and costs ₹1.9 lakhs - that's nearly 4 times what you originally spent!
Why Banks Want You to Pay Minimum Due
Credit card interest is one of the highest profit centers for banks. At 36-42% annual interest, banks make massive profits from customers who pay only minimum due. That's why they make it so easy to pay minimum and send "helpful" reminders about it!
How to Escape the Minimum Payment Trap
- Stop Using the Card: Don't add more debt while paying off existing balance
- Pay More Than Minimum: Even doubling the payment dramatically reduces time and interest
- Use Windfalls: Apply bonuses, tax refunds to credit card debt
- Balance Transfer: Move balance to 0% or low-interest card
- Personal Loan: Take loan at 12-15% to pay off 36-42% credit card debt
- Debt Consolidation: Combine multiple cards into single lower-rate loan
- Negotiate: Call bank and ask for lower interest rate or settlement
Smart Credit Card Usage Rules
- Pay Full Amount: Always pay 100% of outstanding by due date
- Use for Rewards: Only charge what you can pay off immediately
- Set Auto-Pay: Automatic full payment prevents minimum due trap
- Emergency Only: If you must revolve credit, have a payoff plan
- Track Spending: Monitor expenses to avoid overspending
When EMI Conversion Makes Sense
If you cannot pay the full amount, EMI conversion is better than revolving credit:
| Option | Interest Rate | Best For |
|---|---|---|
| Full Payment | 0% | Always best! |
| EMI Conversion | 12-18% | Can't pay full, need structured repayment |
| Revolving Credit | 36-42% | Never! Worst option |