Why paying only the minimum due on your credit card is a debt disaster waiting to happen

Paying only the minimum due on your credit card might seem like a convenient way to manage monthly expenses, but it can lead to a dangerous cycle of debt. While it helps you avoid late fees and maintain a good credit score in the short term, it barely chips away at your overall balance.

The remaining amount continues to accrue high interest, compounding month after month. Over time, you could end up paying significantly more than your original purchases—without realising it. Understanding why this financial habit is risky is essential to maintaining control over your debt and protecting your long-term financial health.

Breaking this habit early can save you money, reduce stress, and help you achieve greater financial freedom.

Adhil Shetty, CEO, BankBazaar.com, said, “For credit card bills, the minimum payment due is typically around 5% of the outstanding bill. However, the unpaid balance begins accruing interest immediately, often at rates as high as 48% per annum. Over time, this interest compounds, and so does your debt. So much so, that, in some cases, you may end up paying more as interest than what you owed originally.”

Consider this scenario as an example. "You have a ₹50,000 credit card bill for March towards which you can make a minimum payment of ₹2,500. You choose that to keep your card active while avoiding a late payment penalty to protect your credit score in the short term. However, the outstanding balance of ₹47,500 starts attracting interest at about 3.3% per month after the due date, totalling about 40% per annum. Now, if you stop using your card but continue to make only minimum payments each month, it will take over 2.5 years to clear the balance. By the end of it, you’ll have paid close to ₹70,000 in total, out of which ₹20,000 is only interest,” explained Shetty.

So, while making minimum payments can offer short-term relief, it should not be a default approach. Instead, consider converting your outstanding balance into Equated Monthly Instalments (EMIs) which have lower interest rates and fixed repayment timelines. You could also explore a balance transfer to a card offering lower interest.