Minimum due

The minimum due is the smallest amount your credit card asks for each month. Paying only that keeps the account regular, but the unpaid rest carries very high interest, which is how card debt snowballs.

What it actually is

The minimum due is usually about 5% of your bill, sometimes with any EMIs and fees added on. Its only job is to keep your card from being marked overdue and to avoid a late fee. It is not a discount or an instalment plan; it is the least you can pay to stay regular. The bank is happy for you to pay just that, because the rest earns it interest.

Why paying only the minimum is a trap

Pay the minimum and the unpaid balance carries interest at around 3.5% a month, roughly 42% a year. You also lose the grace period, so new purchases charge interest immediately. Because the printed minimum shrinks as your balance falls, it barely dents what you owe, and a bill can drag on for years and cost more in interest than the original spend. The chart in the cost of a slow card payoff shows how long and how much.

What to do instead

The only way to pay no interest is to clear the total amount due, the full bill, by the due date. If a tight month means you cannot, pay as much above the minimum as you can, stop using the card until it is clear, and if the balance is large, read how to get out of credit card debt.