Branch Stories: names and personal details have been changed. Based on situations we see in Indian bank branches.
Vikram came in to ask about a personal loan. ₹60,000. “Sir, just to clear one credit card. It’s been bothering me.”
He was 31, worked in a private company, decent salary. I asked him how much he owed on the card.
“Around ₹38,000.”
“And how long have you had this balance?”
He thought for a moment. “Three years? But sir, I pay every month. Never missed even once. Minimum due, always on time.”
The ₹55,000 that never went away
Three years ago, his father had a small surgery. Vikram paid about ₹55,000 on his credit card. After that, he stopped using the card for anything new. Every month, the bill said “Minimum amount due: ₹2,7xx”, and he paid exactly that.
He was proud of it. “I’m disciplined, sir. Never late.”
I asked him to open his card app and add up what he had paid since then. It took him a while.
About ₹87,500. On a ₹55,000 bill. And the card still showed ₹38,800 outstanding.
He went quiet. Then he said, “Sir, ye kaise?”
How the trap works
I drew it on a piece of paper.
- Credit cards typically charge interest of around 3–3.75% a month. That’s roughly 40% or more a year.
- GST of 18% is added on top of the interest.
- The “minimum due” is usually just around 5% of the balance.
So every month, most of what he paid went into interest and GST. Only a small part reduced the actual ₹55,000. Paying the minimum kept his record clean, so he never got a late fee or a warning. That’s why it felt safe. But it was the most expensive loan he had ever taken.
“Minimum due is designed to keep you from defaulting,” I told him. “Not to get you out of debt.”
The way out
We looked at his options together:
- A personal loan at a much lower rate to clear the card in one shot, then a fixed EMI. Even at 12–14% a year, it’s far cheaper than 40%+.
- Converting the card balance to an EMI plan with his card issuer, if offered at a reasonable rate. He was to check the rate and processing fee carefully.
- Using savings if he had any lying idle in a savings account earning 3%.
He took a small personal loan from us, cleared the card fully, and set the card on auto-pay for the total amount due every month. His EMI was smaller than he expected, and it would end in about a year.
When he left, he said, “Three years I thought I was being responsible.” He was. He just didn’t know how the card worked. Most people don’t.
What went wrong
- Paying only the minimum due on a large balance for years.
- Not noticing how much interest and GST were being charged every month.
- No emergency fund, so a medical bill went on the credit card.
Banker’s advice
- Always pay the total amount due, not the minimum. Set auto-pay for the full bill.
- If you can’t pay in full, move the balance to a cheaper personal loan or EMI plan quickly.
- Read the “interest charged” line on every card statement.
- Build an emergency fund so emergencies don’t land on your credit card.
- Keep card usage below 30% of the limit; it also helps your credit score.
Figures are illustrative, based on a ₹55,000 balance, 3.6% monthly interest plus 18% GST, and a 5% minimum due with no new spending. Actual charges vary by card issuer.