Risks Of Credit Card Minimum Payments That You Must Know

Being aware of what is minimum due in a credit card and avoiding it can help you manage your finances in a better way. While it is undeniable that credit cards come with a number of benefits, repaying dues is an important factor for your credit health. 

When you receive your credit card bill at the end of the month, paying only the minimum due amount can be tempting. However, this comes with various limitations and risks, negatively impacting your finances.


Credit Card Minimum Payment: What It Means

At the end of the billing cycle of your credit card, which generally falls at the end of a month, the credit card company sends you your total bill. In addition to the total expenses that you have made using your credit card, the bill also includes:

  • Unpaid dues from the last billing cycle
  • EMI payments that you may have opted


If you are wondering what is minimum due in a credit card, it is not the total bill amount that is due. As the name suggests, it is a small portion of your total credit card bill. Generally, the minimum due amount is 5% of your total credit card bill.


You need to at least pay this minimum amount if you are not able to make the complete payment. Paying the minimum due helps you continue using your card. By paying this amount, you can avoid paying the late payment fee. 


Risks of Paying Only the Minimum Dues of a Credit Card Bill

Here are some limitations of clearing only the minimum due amount of your credit card bill:


  • Interest Charges Keeps on Accumulating

If you go ahead with clearing only the minimum due amount, interest charges are levied on the remaining outstanding balance of the credit card bill. This means that any unpaid credit card bill amount accumulates interest daily. 


This addition to your bill can lead to substantial financial liabilities. In some cases, you may even end up paying much more than you originally spent using the credit card.

  • Reduction in Credit Limit

Another limitation of paying only the minimum due amount of your credit card bill is that it can result in a reduction in your credit limit. This is because an unpaid credit card bill can lead to a higher credit utilisation ratio. 


A high ratio suggests:

  1. High dependence on credit
  2. Inefficient financial management
  3. Financial crunch


  • Negative Impact on Your Credit Score

Yet another risk of not paying your credit card bill in full is that your credit score might take a hit. This is because repeated instances of not repaying your entire bill on time show:

  1. You may be living beyond your means
  2. Your earnings are unstable 
  3. You cannot manage your finances responsibly 


As a result, getting credit in the future, such as loans and credit cards, can become harder. After all, most financial companies check the following when they receive your application for credit:

  1. Credit score
  2. Income and employment
  3. Work experience
  4. Credit utilisation ratio
  5. Existing debts 


  • Chances of Falling into a Debt Trap

Non-payment of your credit card bill in full can lead to interest dues piling up. When this results in an amount that is hard to manage, repaying it can take a toll. This can affect your financial freedom and require you to take on new debt to service existing debt. Such a cycle of debt can be difficult to get out of. 


Tips on Clearing Your Credit Card Bill in Full

Adopting these tips can help you pay your credit card bill in totality:

  • Prioritise credit card bill payments as soon as you get your salary
  • Avoid expenses that are not necessary
  • Look for ways to increase your income 
  • Switch to a debit card to use the money you already have in your account
  • Convert your big-ticket expenses into EMIs for easier repayment
  • Set up an automatic repayment facility to avoid missing the due dates


As you can see, clearing only the minimum due amount of your credit card can be hazardous for your finances in the long run, even if it may look attractive at the moment. To reduce your credit card expenses and pay the full bill every time, plan your budget with care and get a card with low fees and charges. With the One Credit Card you can do both with ease. 


Built on a full tech stack, this premium metal credit card comes with no joining fees or annual renewal fees. That’s not all. There are no hidden charges and no fees when you redeem your 

reward points either. 

In addition, you enjoy easy EMI conversions and up to 5X rewards on top spends. What’s more, the One Credit Card App helps you set limits and makes tracking and spending on a budget simple and quick. Apply now and manage your credit card hassle free.

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