Carrying Forward Credit Card Dues? Here's Why It's A Bad Idea

With annual interest rates ranging from 36-48%, your dues can spiral faster than you may realise. Revolving credit might seem handy, but may slowly weaken your financial stability if not careful

Paying only the ‘minimum due’ might seem like you’re managing your money well. But, in reality, it’s a trap that quietly adds to your debt.

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A credit card makes life easier by letting you shop whenever and wherever you want. But it must never be mistaken for a long-term borrowing option. Carrying forward unpaid balances, even small ones, can quickly lead you into a debt trap. With annual interest rates ranging from 36 per cent to 48 per cent, your dues can spiral faster than you may realise. Revolving credit might seem handy, but may slowly weaken your financial stability if you're not careful. Let’s understand how.

The illusion of the minimum payment

Paying only the ‘minimum due’ might seem like you’re managing your money well. But, in reality, it’s a trap that quietly adds to your debt. Credit card companies allow you to pay as little as 5 per cent of your bill while charging high interest on the remaining 95 per cent. 

For instance, if your bill is Rs 50,000 and you pay only Rs 2,500, interest of 3–4 per cent per month is charged on the unpaid Rs 47,500. That’s Rs 1,425 to Rs 1,900 in monthly interest. Over a year, you could end up paying Rs 17,000 to Rs 23,000 just in interest.

Unpaid dues and compound interest

Credit cards charge interest on not only the balance but also on the interest, leading your debt to snowball. Suppose you carry forward Rs 20,000 at 3.5 per cent monthly interest. Without any new purchases, your balance can grow to Rs 28,500 in a year. Unlike personal loans, credit cards have no fixed tenure or structured repayment. The longer you delay, the larger your balance becomes.

Interest-free periods disappear when you revolve

Credit cards typically offer 45 to 55 days of interest-free credit, but only if you pay your full bill each month. This benefit disappears if you carry forward any balance.  New purchases start charging interest right from the day you make them. For example, if you part-pay your June bill and spend again in July, interest applies immediately with no grace period. Over time, this turns your card into a debt trap instead of a helpful payment tool.

High balances can hurt your credit score

Using too much of your credit limit can negatively impact your credit score. If your card limit is Rs 1 lakh and you owe Rs 80,000, that’s 80 per cent utilisation, which is very high.  Your utilisation should ideally not cross 30 per cent. Maxing out your card and paying only the minimum regularly signals financial stress to lenders and can affect your ability to secure loans in the future. 

Revolving credit might seem like a short-term fix, but it leads to long-term financial stress. The smarter approach is to pay your credit card bill in full and on time. If that’s not possible, consider a structured, lower-cost loan before your card debt gets out of control.

(The author is the CEO at BankBazaar.com. This article has been published as part of a special arrangement with BankBazaar)