Paying only the minimum due on a credit card may feel like a relief, but it is one of the costliest habits encouraged by banks. After all, the bank itself allows it and even highlights the minimum amount clearly on your statement. But what most people don’t realize is that this option works far more in the bank’s favor than yours.
Banks don’t promote minimum due payments out of kindness. They do it because this small payment keeps your account active while allowing interest to grow silently in the background. Over time, this habit can turn a manageable bill into a long-term financial burden.
Let’s understand why banks want you to pay only the minimum due on your credit card and how it affects your money.
What Is the Minimum Due on a Credit Card?
The minimum due is the lowest amount you must pay by the due date to keep your credit card account active and avoid late payment penalties.
In India, the minimum due usually includes:
- A small percentage of the principal (around 5%)
- Interest charged for the billing cycle
- GST on interest and fees
- Any EMI amount due
- Applicable fees or penalties
This means when you pay only the minimum due, most of your outstanding balance remains unpaid and continues to attract interest.
Why Banks Encourage Minimum Due Payments
Banks earn money when customers carry forward balances. Paying the minimum due ensures exactly that.
1. Continuous Interest Income
When you don’t pay the full amount, banks start charging interest on the remaining balance. Credit card interest rates in India usually range between 30% to 42% annually. This interest compounds monthly, sometimes even daily.
The longer the balance stays unpaid, the more interest the bank earns.
2. Debt Stays Longer, Profits Grow
If you clear your full bill every month, the bank earns very little from you. But when you pay only the minimum due, your repayment period stretches from months to years.
A longer repayment cycle means:
- More interest
- More GST on interest
- Higher overall profit for the bank
3. Customer Feels “Safe”
Minimum due creates a false sense of comfort. You feel responsible because you paid something, and the card doesn’t get blocked. This encourages continued spending, even though the debt is growing.
Banks know that once a customer falls into this cycle, they rarely break out quickly.
A Simple Example to Understand the Trap
Imagine this situation:
- Total credit card bill: ₹20,000
- Minimum due: ₹1,000
- Interest rate: 36% annually
You pay ₹1,000 and think the problem is solved. But in reality:
- Interest starts applying on the remaining ₹19,000
- Next month, interest alone can be ₹550–₹600
- GST is added on interest
- Your next bill increases even if you don’t spend again
Within a few months, you may end up paying thousands of rupees extra just as interest.
Why Minimum Due Is a Long-Term Trap
1. No Interest-Free Period
Once you carry forward a balance, you lose the interest-free period on new purchases as well. Even small expenses start attracting interest immediately.
2. Compounding Works Against You
Interest is added to your balance, and next month interest is calculated on this increased amount. This snowball effect makes repayment harder every month.
3. Credit Score Can Still Suffer
While paying minimum due avoids default, high credit utilization (using too much of your limit) negatively impacts your credit score.
Common Myths vs Reality
Many people misunderstand how minimum due works.
Some believe paying only the minimum due avoids interest.
In reality, interest continues on the remaining balance.
Others think GST is charged on card purchases.
GST applies only to interest, fees, and penalties — not on shopping transactions.
Lifetime free card users often assume zero charges.
Even lifetime free cards charge interest, cash advance fees, and foreign transaction markup.
When Paying Minimum Due Makes Sense
Paying only the minimum due is not always wrong. It can help in:
- Medical emergencies
- Temporary cash flow issues
- Unexpected expenses
But it should be a one-time decision, not a habit. Using minimum due every month slowly damages your financial health.
What You Should Do Instead
Here are smarter alternatives:
- Pay the full outstanding amount whenever possible
- If full payment isn’t possible, pay more than the minimum due
- Avoid using the card again until you clear the balance
- Convert large purchases into EMI instead of revolving credit
- Set payment reminders to avoid missing due dates
These small steps save you a huge amount of money in the long run.
Why Banks Won’t Warn You Clearly
Banks do disclose these details — but in fine print, complex terms, and long statements. Most people don’t read them. Minimum due looks like a helpful feature, but it quietly keeps customers paying interest month after month.
The system is legal, but it depends heavily on lack of awareness.
Paying only the minimum due on your credit card is not a shortcut — it’s a slow detour into expensive debt. Banks benefit when balances stay unpaid, which is why minimum due exists and is promoted so clearly.
You’re not careless if you’ve done it before. Most people do. What matters is understanding the truth and changing the habit early.
A credit card is a powerful tool when used wisely — but only if you control it, not the other way around.
Also read : Credit Card Charges in India 2026: Hidden Fees Explained
