Finance · Free tool
Credit Card Min Payment Trap
Indian credit cards charge 36-48% APR (3-4% per month) on revolving balances. Pay just the "minimum due" (typically 5%) and you can stay in debt for a decade.
Lesson: clear in full each cycle, or convert to a personal loan at 12-15% — way cheaper.
How it works
We simulate month-by-month: each month adds finance charges (rate × outstanding) plus 18% GST on those charges, then deducts your minimum payment (typically 5% of balance, subject to ₹100–₹500 floor). We stop when the balance reaches zero and report total months and total interest paid. The catch: any new spend during this period restarts the 50-day interest-free window from the next cycle, so most cardholders never break out.
Worked example
A ₹1,00,000 balance on a typical HDFC, SBI Card or Axis card at 3.49% per month (~42% APR) with the standard 5% minimum due: it takes nearly 12 years to clear and you pay roughly ₹1,80,000 in interest plus GST — almost 2x the original spend. Double the minimum to 10% and it clears in under 4 years with ~₹55,000 interest. Pay the full statement balance and you owe exactly ₹0 interest.
When to use this
- Realising the true cost of revolving an Amazon Pay ICICI or Tata Neu card balance
- Comparing minimum-due drift with a personal loan or balance transfer to 0% offer
- Setting a target monthly payment to be debt-free in 12 months
For an alternative, see our card EMI vs personal loan comparison — converting a swipe to EMI at 14% beats revolving at 42% nearly every time.
FAQ
Why is the minimum payment so dangerous?
Min payment (typically 5%) barely covers monthly interest. The remaining 95% keeps accruing at 36-42% APR. ₹1L balance with min payments takes 8+ years to clear and costs ~₹1.5L in interest.
What is the right way to handle a CC balance?
Option 1: pay in full each cycle — best. Option 2: convert to bank EMI at 12-18% — much cheaper than revolving. Option 3: take a personal loan at 11-15% to clear the CC. Never just pay minimum.
Is interest compounded daily or monthly?
Most Indian credit cards compound daily (effective monthly rate ~3.0-3.5%). The APR you see (e.g. 42%) is annualised — actual cost is closer to 50% effective annual rate due to compounding.