Credit card minimum due: Is it enough? The credit score reality every user should know | Mint

In the country, credit cards have now become indispensable tools for managing day to day expenses and meeting funding obligations during emergencies. Still, a common belief persists that paying just the minimum amount due each month is sufficient for maintaining a healthy credit score and a strong credit profile. Do note, this fact is partially correct and comes with a set of serious challenges.

What is the minimum amount due on a credit card?

The minimum payment amount is nothing but the smallest payment your credit card issuer requires for the billing cycle. It is generally around 5% of your total outstanding balance. It helps in helping borrowers avoid late fees but paying only the minimum can still lead to high interest charges over time.

What happens when you pay only the minimum due?

Paying the minimum due amount on your credit card bill will keep your account in good standing and even prevent late fees or penalties. Still, this practice does not eliminate the bulk of the outstanding balance that continues to accrue interest at higher rates.

For example, a ₹50,000 balance repaid through minimum payments could take over five years and cost more than double in the total interest and fees that are charged on the entire transaction.

The hidden impact on credit scores

Now paying only the minimum due doesn’t directly hurt your credit score, but it can definitely raise your credit utilisation ratio. This is a clear red flag for lenders and it has the potential to gradually lower your score and make future loans and credit applications more difficult to secure.

Sarika Shetty, Co-founder & CEO of RentenPe, notes “A good credit score helps, but lenders also evaluate income stability, FOIR, credit mix, and job profile. Today’s digital underwriting models go further, assessing cash flow patterns, data consistency, and even your digital footprint.”

Long term financial consequences

Therefore, paying only the minimum amount due is a very costly strategy. Most of the payments under this goes towards serving the interest and fees, with only an extremely small portion reducing the principal. This can also eventually lead to credit cardholders falling in a cycle of debt, thus making it extremely difficult to pay off the remaining balance. The longer the debt persists and sticks around the more interest accumulates and the harder it becomes to qualify for new credit cards or loans.

What should cardholders do instead?

It is always prudent to pay the full outstanding amount each month. This is important to basically avoid interest charges and maintain a strong credit profile.

If it is not possible in such cases, paying as much as possible above the minimum due is the best strategy. The focus should be to clear the balance of debt payment as quickly as possible. This strict approach helps in keeping the credit utilisation low and signals responsible financial behaviour to the lenders.

Disclaimer: Mint has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit scores. Mint does not promote or encourage taking credit, as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.