Paying only the minimum due on your credit card might seem convenient, but it leads to high interest charges, late fees, and a negative impact on your credit score. Here’s why you should avoid it.
How Minimum Due Payments Affect You
1. Increased Interest Costs
If you don’t clear your bill in full, interest is charged from the transaction date. For example, if you have a ₹1 lakh bill and pay only the minimum due, banks charge 2-3% monthly interest from the transaction date. Delaying full payment by 15 days after the due date could result in 60 days of interest, making your debt grow significantly.
2. Negative Impact on Credit Score
Regularly paying only the minimum due suggests financial stress. It increases your credit utilization ratio and lowers your credit score, making future loans and credit approvals difficult.
3. Late Fees and Additional Charges
If you don’t clear the full outstanding amount, banks impose late payment fees, additional charges, and GST on interest, further increasing your liability.
4. Debt Accumulates Quickly
Credit cards carry high interest rates (30-45% annually). Paying just 5% of your balance (the minimum due) allows the remaining amount to compound, making it harder to clear your debt.
To avoid unnecessary financial burden, always try to pay your credit card bill in full. This prevents high interest, protects your credit score, and keeps your finances in check.