Every month when your credit card bill arrives, there’s a line titled 'Minimum Amount Due' (MAD). This is the smallest portion of your bill that you’re required to pay to avoid a late fee. Paying it sounds convenient — especially when money’s tight — but it’s a financial shortcut that comes with long-term consequences.
Paying just the minimum keeps your account in good standing and ensures that banks don’t mark your card as defaulted. It also buys you some time if you’re facing a financial crunch. For many users, that small payment offers short-term relief — it avoids penalties and protects your credit score, at least on paper.
But beneath the surface, the costs pile up quickly.
When you pay only the minimum amount, the rest of your balance starts building interest — often between 30% and 40% a year. You also lose your interest-free period, which means every new purchase begins attracting interest immediately.
This is how the debt spiral starts. You keep paying small instalments, but the interest keeps growing faster than your repayments. Over time, you could end up paying much more than you originally spent.
Another hidden cost is your credit utilisation ratio — the percentage of your credit limit you’ve used. A high balance compared to your limit can hurt your credit score, even if you’re making minimum payments. That, in turn, makes it harder to get future loans or credit cards at favourable rates.
The best approach is simple: always aim to pay your full bill by the due date. This helps you enjoy the card’s interest-free period and keeps your finances healthy.
If you’re short on funds, paying the minimum is better than skipping payment altogether — but treat it as a one-time fix, not a habit. Try to clear the remaining balance as soon as possible to avoid snowballing interest.
It’s also smart to keep your credit utilisation below 30% of your total limit. So if your credit limit is ₹1 lakh, try not to spend more than ₹30,000 unless you can clear it fully each month.
Paying the minimum due is not a financial disaster — but it’s definitely not a solution either. It keeps your card active and your record clean, but it quietly builds expensive debt in the background. Think of it as pressing “pause,” not “reset.”
