Late fee

A late fee is a one-time charge the bank adds when you do not pay at least the minimum due by the due date. On Indian credit cards it is slab-based on how much you owe, from nil on small dues up to around ₹1,300 on large ones, plus GST.

How it differs from interest

The late fee and interest are two separate costs, and this trips people up. The late fee is a fixed, one-time penalty for missing the due date. Interest is an ongoing charge on whatever balance you did not pay, running at around 3.5% a month. You can be charged both at once: a late fee for being late, and interest on the unpaid amount. Of the two, the interest that keeps running is usually the bigger cost.

Paying the minimum avoids only the fee

Paying at least the minimum due by the due date avoids the late fee and keeps your account regular. But it does not stop interest, and it does not clear your bill. So the minimum protects you from the penalty, not from the far larger cost of carrying a balance. Missing even the minimum can also hurt your credit score if the payment slips far enough past the date.

How to avoid it

Pay the total amount due in full by the due date and you face neither the fee nor interest. If money is tight, at least pay the minimum on time to dodge the penalty, and set an auto-pay or a reminder so a due date never slips. Banks revise these charges often, so check your card’s schedule of charges for the current figure.