Hidden risks of credit card minimum payments: How users can escape the debt fall and increase their credit values ​​| Mint

Credit cards are financial instruments that offer flexibility, comfort and seamless digital payments. However, if you rely too much on paying only the minimum amount owed, it can lead to a dangerous debt cycle. Although only the minimum payment seems possible as a short -term solution to avoid fines for late payments, it poses serious risks to credit card users in India. Let us investigate this general pothole, the minimum payment fall, in detail. This can force credit card users into increasing debt, leading to a loss of financial credibility, a decline in reliability and a significant decline in credit values. Minimum payment fall The minimum payment owed is generally 5% of your total outstanding balance on your credit card, along with processing fees and interest. For example, if your credit card account is £ 1,00,000, the minimum payment can be £ 5,000. While making this payment, keep your account in good status, do little to reduce the head amount owed or improve your credit consumption ratio. The remaining balance still builds up and earns interest, often as high as 40% to 42% annually, which connects the debt over time. If not checked and cleaned, this growing interest can get out of control and push credit card users into an endless debt trap. In the long run, this can severely impede credit profile. The impact on financial health that focuses on paying only the minimum amount can create a debt spiral. The situation can easily get out of hand if you miss one payment or pay the minimum amount in subsequent installments. Such developments are not good for your credit health. High interest costs: A large part of your payment goes to interest refund instead of reducing the main amount. This is not a healthy repayment position. This comes with the serious possibility that this interest amount later in larger debt snowball. Loss of interest -free period: Any new purchases on your credit card in the future will no longer enjoy an interest -free period, further increasing costs. Longer and dragged repayment period: After this process, your credit card debt may take years, which will cost thousands in interest alone. Reduced creditworthiness: Higher credit utilization, along with prolonged repayment periods, has a negative impact on your creditworthiness and credit profile. This will make any future loan applications or credit card approvals more challenging. Emotional tension: The idea of ​​surviving minimum payments is nothing but the admission of debt dependence on basic needs. Such a simple idea may seem profitable, but it can also result in high EMI accounts and very high interest rates. The psychological tension of achieving such high levies on a weekly to monthly basis can expand your finances. Unable to manage debt, young Indians fall into rising defaults that India has recently seen an increase in credit card distance. This is especially true among millennials and Gen Z. Many young borrowers are attracted by easy EMI options and now buy and pay later schemes. They fall into the trap of only the minimum paid, which contributed to rising defaults. For example, by June 2024, the total outstanding credit card fees reached £ 2.7 Lakh Crore, reflecting a 24% composite annual growth rate over the past five years. Avoid falling for the minimum payment debt Focus Focus on paying more than the minimum month. Avoid unnecessary spending and focus on the conservation of your credit card limit. Keep your credit consumption ratio below any cost below 30%. Prioritize the clearance of high interest first. Reach out to experts to discuss basic concepts of debt management. The attractiveness and excitement of minimum payments and easy credit card use is therefore misleading. It comes with serious consequences of debt build -up. Therefore, you can boost the financial security and peace of mind to promote the risks of building credit card debt and accepting responsible and well -planned repayment habits. You should only go for credit cards, personal loans or any other credit tools if you have no other options. As such, credit instruments have high interest rates and a serious threat to fall into an endless debt fall. Disclaimer: Mint has a fusion with fintechs to provide credit, you must share your information if you apply. These bonds do not affect our editorial content. This article only intends to educate and distribute awareness about credit needs such as loans, credit cards and creditworthiness. Mint does not promote or encourage credit as it has a set of risks such as high interest rates, hidden costs, etc.