It is a familiar, frustrating scene: you carefully pay your credit card bill every single month, yet your total balance barely budges. If you are clearing only the “Minimum Amount Due,” you are likely trapped in a high-interest credit card debt spiral. A massive chunk of your payment goes directly toward steep finance charges and GST, leaving a tiny fraction to actually reduce your principal debt. Tanish Sharrma, Co-founder, CEO, and CTO of BillCut, warns that paying minimum dues keeps you safe for the month, but it never sets you free. Here is a clear look at how minimum payments trap borrowers and how to break the cycle.
Paying your minimum amount due on time prevents late fees, but it traps you in a endless debt cycle. Most of your money pays off heavy interest charges and GST, leaving the principal balance virtually untouched. (Image: Canva)
Imagine holding a Rs 1 lakh balance at a 3.75 percent monthly finance charge. Over one year, paying only minimum dues totals around Rs 69,160 out of pocket yet your remaining debt barely drops, leaving you owing roughly Rs 78,470. (Image: Canva)
Out of the Rs 69,160 paid over twelve months, Rs 47,630 goes purely toward interest and GST fees. Only about Rs 21,530 reduces your original balance, keeping you tied to high-cost revolving debt for years. (Image: Canva)
Rolling over a partial balance cancels your grace period under RBI rules. Interest immediately begins accruing from transaction dates on old balances and fresh purchases alike, snowballing your overall debt much faster than expected. (Image: Canva)
According to Tanish Sharrma, red flags include stagnant outstanding balances despite regular payments, using credit cards for everyday groceries because your salary ran out, or borrowing from one source to pay another. (Image: Canva)
Moving credit card debt to a personal loan can significantly cut interest costs. For example, a Rs 1 lakh personal loan at 16 percent over two years requires an EMI of about Rs 4,896, capping total interest at roughly Rs 17,500. (Image: Canva)
Converting card debt into a loan isn’t a magic bullet. You must factor in processing fees, eligibility, interest rates, and avoid racking up new card charges. However, a fixed loan provides a structured payoff timeline. (Image: Canva)
Minimum payments serve as a short-term safety net, not a debt-clearing plan. Stop asking if you can manage this month’s minimum, and ask yourself: “Is my balance falling, and when will I be completely debt-free?” (Image: Canva)
Source link
[ad_3]
