Ritesh Sabharwal CFP®

W.M.W #5: Paid ₹5k, but it still triggered a 39.57% interest?

Reading time: 4 minutes - July 19, 2025

↓

Hey Reader

The “minimum amount due” on your credit card is a scam.

“They say - Pay just ₹5,000 this month and you’re safe!”

But what most people don’t realize is—this move doesn’t save you money. It locks you into one of the most expensive debts.

Today, I’m breaking down:

• Why minimum amount due is not as good as it seems
• How one small slip can cost you thousands in interest
• The exact way to break free if you’re already caught in this loop

I want you to keep every rupee you earn—starting now.

3 Things To Know About Minimum Due (So You Don’t Pay 40% Interest Even if You “Paid” Your Bill)

In order to avoid credit card traps, you need to know the rules—because the banks or credit card companies sure aren’t going to explain them.

Here’s the breakdown:

1. Minimum Amount Due = Late Fees Avoided, But Interest Guaranteed

Here’s how it works:

Let’s say your card statement runs from 1st April to 30th April. You spent:

• ₹40,000 on 5th April
• ₹60,000 on 20th April

Total bill = ₹1,00,000, due by 15th May.

Now you have two choices:

✅ Option A: Pay full ₹1,00,000 → Zero interest, zero late fees.

❌ Option B: Pay minimum due ₹5,000 → No late fees, but interest kicks in on every transaction from the day you spent the money.

What’s the cost of Option B?

→ Even if you pay the full bill just 5 days late, you’ll pay around ₹3,477 extra in interest.

That’s because:

• Most cards in India charge 36–40% annualized interest on unpaid amounts.
• Every transaction loses its grace period immediately.
• Even new purchases are billed interest from day one.

2. It Damages More Than Just Your Wallet—Your Credit Profile i.e. your CIBIL score takes a hit too.

You might think: “Okay, I’m not paying late fees, so I’m safe, right?”

Wrong.

Consistently paying only the minimum amount puts you in a category banks call “revolvers.”

Here’s what that means:

• You’re seen as someone who carries debt forward regularly.
• Lenders flag you as high-risk for future loans—home, car, personal, you name it.
• Even if you have never missed a payment, your credit score silently suffers.

I know someone who lost out on a dream home because their loan interest rate shot up due to past “minimum due” behaviour—even though they thought they were managing fine.

Another person saw his CIBIL score drop from 780 to 725 due to this behaviour of just paying the minimum amount due.

It’s not just about today’s ₹5,000. It’s about tomorrow’s ₹50 lakh.

3. How To Break Free (Without Emptying Your Savings All at Once)

Let’s say you’re already stuck.

You’ve got ₹1.5 lakhs outstanding, you’ve been paying the minimum due, and the interest is snowballing.

Here’s your game plan:

✅ Option A: Convert to EMI

Every major Indian card—HDFC, SBI, ICICI, Axis—offers a bill-to-EMI feature. Interest drops to ~14–20%. Still not great, but much better than 40%.

✅ Option B: Take a Low-Interest Personal Loan and Clear the Card

One-time fix. Personal loans can be as low as 10–12%. The moment you pay off the card in full, the card goes back to zero interest on new spends (as long as you pay full bill every month going forward).

✅ Option C: Freeze Spending

If you’re serious about getting out, stop swiping until you clear the balance. Use a debit card or UPI for essentials.

Bonus Move: Set up auto-debit for Total Amount Due (not minimum) so you never fall into the trap again.

Here’s what you learned today:

• Paying minimum due = no late fees, but crazy high interest on every rupee
• This habit hurts your credit score even if you never default
• You can escape with EMIs, personal loans, or temporary spending freeze

Sneak Peek👇

Next week I will tell you about “10-7-1: The lazy investor’s wealth formula”

So, stay tuned!!

Connect with me on LinkedIn, I write every day to help you make smarter money decisions👇

​