Key reasons why you should avoid paying the minimum amount due on credit cards

Although credit cards have been around for a long time in India, it’s only in the last few years that the credit card has become more and more popular. Some of the main reasons why credit cards are a popular choice, especially among young professionals, are the changing consumption patterns and people becoming financially savvy. Credit cards used to be avoided, but now they have become a necessary part of our daily lives.

Sometimes we find ourselves spending a lot of money during the month, and by the time we get our credit card bill, we’re tight on cash. We may not be able to pay all debts in such circumstances. Any amount that is not paid in full at the end of the month also earns a lot of interest. The “Minimum Amount to Pay”, otherwise known as MAD, can save us in these tough times.

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What is the minimum amount?

You have two payment options when you receive your credit card statement. The first is the total amount outstanding, and the second is the minimum amount due. When you don’t have enough money, you can pay the minimum amount.

A credit card’s minimum payment is the minimum amount that must be paid on or before the payment date to avoid late payment penalties. The bank ensures that you can make monthly repayments by specifying a minimum amount.

Generally, the minimum payment is set at 5% of the total amount due to be determined on the day the credit card statement is issued.

However, paying the minimum amount on your credit card can have serious consequences.

What are the disadvantages of paying the minimum amount due?

If you regularly pay the minimum amount without keeping your spending in line with your income, you will eventually end up with credit card debt. Then, to pay your bills, you may need to take out a personal loan.

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You can’t get approved for a loan or get it at a very high interest rate if you have a bad credit score. This can lead you into a bad debt trap.

In addition, prolonged use of credit card balances with unpaid balances may result in interest charges. Additionally, if you continue to pay less, your debt will not decrease, and you will end up spending more of your monthly income on interest payments.

In addition, it will be more difficult to get a loan in the future if you choose this strategy. Lenders evaluate your payment history when you apply for a loan, and they’ll see if you’re struggling to make your credit card payments, which could put you in trouble.

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By paying the minimum amount each month, you can keep your credit card active. However, there will be no interest free period and you will have to pay exorbitant interest. You should keep in mind that you will end up paying more interest if you pay less on the balance due.

You have the option to pay the minimum amount required in case of financial problems or financial problems in a given month. By paying the minimum amount due, you can avoid negative effects on your credit score and late payment fees, but this deal should only be used for a short period of time.


Remember that a credit card is ‘credit’ first and ‘card’ second.

First published: December 13, 2022 at 08:04 IST


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