Minimum payments can keep an account current, but interest may accrue from the transaction date, with GST adding to the cost and high balances potentially weighing on credit scores.
When a credit-card statement arrives, the temptation to pay only the minimum amount due can be strong, especially when cash is tight. But the relief is often deceptive. According to the Reserve Bank of India’s consumer guidance, paying less than the full amount due by the deadline can end the interest-free period and allow interest to run from the transaction date on the unpaid balance. In practice, that means the minimum payment is designed to keep the account current and avoid late fees, not to help the borrower escape debt.
The numbers can become punishing very quickly. The lead article argues that on a balance of ₹1,00,000, repeatedly paying only the minimum could stretch repayment over 13 to 15 years and leave the cardholder paying well over ₹1.6 lakh in interest and tax. The exact outcome will vary by issuer, rate and formula, but the core warning is consistent: with revolving balances, a large share of each payment goes to finance charges rather than reducing the principal. Axis Bank’s card guidance also shows that interest may accrue from the transaction date when the previous bill is not cleared in full, underlining how costly this habit can be.
There is also a tax cost that many cardholders overlook. The Central Board of Indirect Taxes and Customs says GST can apply to credit-card interest, which means the finance charge itself can attract an additional levy. That makes the true cost of carrying debt higher than the headline interest rate suggests. The RBI’s master direction on credit cards likewise makes clear that the minimum amount due should be calculated so that it does not create negative amortisation, meaning the outstanding balance should not keep growing simply because the payment is too small to cover charges.
A persistent carried balance can also affect a borrower’s credit profile. TransUnion CIBIL says credit utilisation is the relationship between outstanding balances and available credit limit, and that high utilisation can weigh on a score because it signals heavier dependence on borrowed money. The lead article’s example is stark: on a card with a ₹1.20 lakh limit, a ₹1 lakh balance would leave utilisation at more than 80 per cent, a level that could raise concerns for future lenders. While no single threshold guarantees a score drop or loan rejection, the broader message is clear: staying near the limit is rarely a good idea.
For cardholders trying to break the cycle, the safest route is to pay more than the minimum whenever possible and stop adding fresh spending while carrying a balance. The RBI’s rules and issuer disclosures both point to the same practical lesson: once a card becomes revolving debt, the costs compound quickly, the grace period disappears, and repayment can drag on far longer than expected. The minimum due may keep the account open, but it is not a shortcut out of debt.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
