The Truth About Minimum Payments—and Why They Keep You in Debt

Paying the minimum amount due on your credit card every month might seem like a responsible move. After all, you’re not missing your payment—right? But here’s the hard truth: minimum payments are designed to keep you in debt for as long as possible.

Let’s break down how it works, why it’s dangerous, and what you can do instead.

What Is a Minimum Payment?

The minimum payment is the smallest amount you must pay each month to keep your credit card account in good standing. In India, it’s typically 5% of your outstanding balance, or a fixed amount like ₹200—whichever is higher.

Example:If you owe ₹20,000, your minimum due might be ₹1,000.

Sounds manageable, right? But here’s the catch: the remaining ₹19,000 keeps accumulating interest—and credit card interest rates in India can be as high as 36–42% annually.

Why Minimum Payments Are a Debt Trap

1. You’ll Pay More Interest—A LOT More

Making only the minimum payment means most of your money goes toward interest, not the actual debt. Your principal barely reduces, so you stay in debt longer.

Real Example:

Credit Card Debt: ₹50,000
Interest Rate: 3.5% per month (approx. 42% annually)
Minimum Payment: ₹2,500 (5%)If you only pay this, it may take 5+ years to repay fully, and you could end up paying ₹1+ lakh in total (double your original debt!).

2. It Damages Long-Term Financial Health

You might think you're managing money well by not defaulting—but you’re actually:

Losing money to high interest every month
Keeping your credit utilization high, which may lower your credit score
Piling on stress with a debt that never seems to shrink

3. It Encourages Complacency

Minimum payments create a false sense of security. You feel you're doing enough, so you keep swiping the card. This leads to a debt spiral where your balance keeps growing and your financial freedom keeps shrinking.

What You Should Do Instead

Pay the Full Amount Due

This helps you avoid interest altogether and build a strong credit history.

If You Can’t Pay in Full, Pay More Than the Minimum

Even paying 10–20% extra over the minimum can drastically reduce your debt term and total interest paid.

Use the Avalanche or Snowball Method
Avalanche: Pay off highest-interest debt first
Snowball: Pay off smallest debt first for motivation

Consider a Personal Loan

Credit card debt often has higher interest than personal loans. A debt consolidation loan may save you money if used wisely.

Final Thoughts

Minimum payments are a safety net, not a solution. They help you avoid late fees—but they don’t help you get out of debt.

If you’re relying on minimum payments month after month, it’s time to take a closer look at your spending and debt repayment strategy. The sooner you break free from the trap, the more control you’ll have over your money—and your future.