Minimum amount due: why paying only the minimum costs far more than you think

Minimum amount due: why paying only the minimum costs far more than you think

Published: 19 October 2026

Category: how-to-guides | cardbuzz

The minimum amount due feels like a lifeline: pay 5%, dodge the late fee, stay "current." Banks present it as responsible behaviour. In reality, the minimum due is the most expensive payment option on your statement — a mechanism that converts a one-month bill into a multi-year debt at 40%+ annual interest. Here is the math nobody shows you.

What the minimum actually is

The minimum amount due (MAD) is typically 5% of the total outstanding (or a small flat amount, usually ₹100–₹500, whichever is higher). On a ₹1,00,000 statement, that is ₹5,000. Paying it by the due date:

• ✅ Avoids the late payment fee (₹100–₹1,300 depending on the balance slab).
• ✅ Avoids a "missed payment" mark on your CIBIL report — the bureau records it as paid.
• ❌ Does not stop interest. Interest accrues on the remaining ₹95,000 from the transaction dates.
• ❌ Kills the interest-free period on all new purchases going forward.

That last point is the hidden multiplier: the minimum does not just cost interest on what you revolve — it strips the grace period from next month's spending too.

The true cost: a worked example

₹1,00,000 balance, 3.75% monthly finance charge (45% annual — SBI Card's published ceiling), 5% minimum due paid monthly, no new spending, 18% GST on the interest:

After 12 months of "responsible" minimum payments, you have paid roughly ₹59,700 — and you still owe ₹91,222. You paid 60% of the original debt in a year and reduced the principal by less than 9%. At this pace, clearing ₹1,00,000 takes the better part of a decade, with total interest exceeding the original purchase several times over. (Illustrative computation at 3.75%/month + 18% GST on interest; actual bank computations vary slightly by day-count method.)

The minimum on EMI-linked statements

If your statement includes an active EMI plan, the minimum due is typically computed as the EMI amount plus 5% of the non-EMI balance (plus any overdue amounts). This means the "minimum" on an EMI-heavy statement can look deceptively large — or deceptively small relative to the total. Either way, the same rule applies: paying only the minimum keeps the EMI running but lets the non-EMI balance revolve at 40%+ annual interest with no grace period. When carrying an EMI plan, the correct payment is the EMI plus the full remaining balance — not the EMI plus the minimum.

Why the minimum feels safe (but is not)

Three illusions sustain the minimum-payment habit:

1. "My CIBIL is fine, so I must be fine." The bureau records minimum payments as on-time — true. But it also records your rising utilization as the balance barely shrinks, and utilization drags the score down through a different door.

2. "I'll pay it off next month." Next month brings new spending (now without any grace period), and the balance rarely falls. Minimum payers revolve for an average of many months; the habit is sticky because the payment feels small.

3. "The interest is only 3.75%." Per month. Annualized, that is 45% — roughly four times a personal loan rate. The monthly framing is the marketing; the annual number is the reality.

When paying the minimum makes sense (rarely)

There are exactly two situations where the minimum is the right call, both temporary:

• A genuine cash-flow emergency — job loss, medical bill — where the alternative is missing the payment entirely. The minimum protects your CIBIL record while you stabilize. Resume full payments the moment you can.
• A planned, short balance transfer — you are about to move the balance to a lower-rate product within weeks.

In both cases, the minimum is a bridge, not a destination. Set a hard date to cross back to full payments.

The escape plan if you are already in the minimum trap

1. Stop new spending on the revolving card immediately. Every new purchase accrues interest from day one (no grace period) — you are digging while trying to climb out. Use a debit card or a different credit card that still has its grace period intact.
2. Pay more than the minimum — any fixed amount above it. Even ₹2,000 extra per month dramatically shortens the payoff curve because it attacks principal.
3. Consider a balance transfer or personal loan. Shifting ₹1,00,000 from 45% card interest to a 12–15% personal loan cuts the interest cost by two-thirds and imposes a fixed payoff schedule. Many banks offer balance-transfer plans at 0.99–1.5% per month for 6–12 months.
4. Convert to EMI if the purchase qualifies. Card EMI plans typically run 12–24% per annum — still expensive, but half the cost of revolving.

Bottom line

The minimum amount due — typically 5% — protects you from late fees and CIBIL damage, and that is all it does. Everything else about it is costly: 40–48% annual interest on the remainder, GST on that interest, and no grace period on new spending. Use it as an emergency bridge for a month or two; as a habit, it turns a ₹1 lakh bill into a multi-year, multi-lakh burden.

Sources: Paisabazaar credit card interest-rate tables 2026 (issuer monthly rates incl. SBI Card up to 3.75%); RBI Master Direction on Credit & Debit Cards 2022; illustrative amortization at 3.75%/month + 18% GST.