If you use a credit card, a line appears every month on your statement labeled Minimum Amount Due (MAD). Many people think that simply paying this amount means they're done with their responsibility. But is it really safe to pay only the minimum amount? Does it affect your credit score? Half of credit card users remain confused, so let's explain it simply.

What is Minimum Amount Due?
Minimum Amount Due is the minimum amount that, if paid by the due date, avoids late fees.
It's usually 5% to 10% of your total outstanding balance.
If you have a ₹50,000 balance on your card, the bank may ask for approximately ₹2,500 to ₹5,000.
Paying this amount isn't considered "late."
But interest continues to accrue on the remaining balance.

The question is, does this immediately lower your credit score? Answer: Technically, no.

If you pay the minimum amount on time every month, your account won't go into default.

Your maintenance record will remain good, and "late payment" won't be reflected in your credit report.

People don't realize that this is why your score doesn't drop immediately.

Question: Then where's the problem?

When you pay only the minimum amount, the remaining amount incurs heavy interest.

The bank can charge 30% to 45% annual interest.

This interest continues to accrue every month, increasing the debt.

You think the payment has been made, but the actual amount doesn't decrease.

Another major problem is the credit utilization ratio.

If you spend ₹80,000 out of a ₹1 lakh limit, the utilization will be considered 80%.

However, it's always recommended to use less than 30%.

Excessive use also indicates risk to the bank.
This can gradually lower your CIBIL score, even if you're paying the minimum due amount.

Understand the disadvantages of paying the minimum amount.
1. Heavy interest burden: A higher interest rate is charged on the remaining balance.
2. Loan duration: The principal amount doesn't decrease.
3. Impact on score: A high outstanding balance makes your profile appear weak.
4. Loan problems: There may be problems with home loans, car loans, or personal loans.
5. Less chance of limit increase: Banks may consider you a risky customer.

Is it ever okay to pay the minimum amount?
Yes, but only in emergencies. So, if you have a sudden medical emergency or cash flow issues for a month or two, paying the minimum amount can save you from late fees and legal notices. However, making it a habit is considered dangerous. So, if you pay only the MAD for several consecutive months, you could rack up a mountain of interest.

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