AKG Money

Credit card minimum-due trap

“Minimum amount due: ₹5,000” looks manageable. Pay only that and a ₹1 lakh bill can take years to clear and cost more in interest than you spent. See the numbers for your card.

These are example numbers. Change any of them to see your own answer.

Your card
₹

= ₹1 L

Usually 3–3.75% a month on Indian cards: 36–45% a year, plus 18% GST on the interest.

%

Usually 5% of the amount owed.

%
Paying it off
₹
31 yr 5 mo

Paying only the minimum due on ₹1,00,000 takes 31 years 5 months and costs ₹4,27,853 in interest and GST. Paying ₹10,000 a month clears it in 1 year 2 months for ₹32,977.

Clearing ₹1,00,000 at 3.6% a month (65% a year with GST)
ItemMinimum due₹10,000 a monthBetter
Time to clear31 yr 5 mo1 yr 2 mo
Interest and GST₹4,27,853₹32,977
Total you pay₹5,27,853₹1,32,977
Minimum due only31 yr 5 mo

How this is worked out

  1. Each month, interest is charged on what you owe at the card's monthly rate, plus 18% GST on that interest.
  2. Paying the minimum: each month you pay the minimum due (a share of what you owe, at least ₹200) and nothing new is spent on the card.
  3. Paying a fixed amount: the same each month until it's cleared.
  4. This is simplified: real cards also charge interest on new purchases once you carry a balance, so the real cost is usually higher.

Questions people ask

Does paying the minimum due hurt my credit score?

It avoids a late-payment mark, but a high balance compared with your limit lowers your score, and you lose the interest-free period on new purchases until you clear it.

What's the cheapest way out of card debt?

Stop using the card, then replace the debt with something cheaper: a personal loan at 11–16%, a loan against an FD, or converting the balance to an EMI. Then pay the most you can each month.

Is converting to EMI a good idea?

Usually better than revolving at 40%+, but check the EMI interest rate, the processing fee and GST. Compare it in the cash vs EMI calculator.

Why is the yearly rate higher than 12 × the monthly rate?

Because unpaid interest gets charged interest too, and GST is added on top. 3.6% a month works out to over 50% a year.

Is my data saved anywhere?

No. Everything is worked out in your browser. Your numbers stay on your own device, and the page link holds them so you can share them.

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