Minimum Balance in Credit Card – How does it work ?

POSTED BY Jagoinvestor ON May 7, 2012 COMMENTS (358)

A lot of people have no idea on how their credit card works and what is the exact interest applications. Credit cards are in the market mainly to make money from customers by charging them huge interest because they overuse their credit limit or just fall for the minimum balance option and get into a debt trap. Let’s first understand a few concepts like billing cycle and grace period to start with

How Billing Cycle in Credit Card works?

The billing cycle is the duration for which you are liable to pay the due amount. e.g. from the period 6th Mar- 5th Apr. It means that your bill gets generated on the 5th of every month. This bill includes all the transactions done in the last 30 days. If you buy something on 7th Mar, that transaction will appear on the bill generated on 5th Apr and if you buy something on 4th Apr, still it appears on the bill generated on 5th Apr.

What is the meaning of the Grace period?

A grace period is a number of days up to when you have the liberty to pay off your last bill. For example, if the grace period is of 25 days, in that case, you will enjoy no interest for the next 25 days from the recent billing date. In our example, as the billing happens on the 5th of every month. You can pay off the bill till the 30th of that month, but after that you start paying the interest if you don’t pay the bill in full.

A maximum number of days without interest?

So now based on this info, what is the maximum number of days for which you can enjoy interest-free credit?? The answer is the maximum 55 days! It’s because your billing cycle length is 30 days and grace period is 25 days, so if you purchase anything on the first day of your billing cycle, in this example say 6th Mar, then it will actually appear on your bill of 5th Apr (30 days are gone) and you still get 25 days to pay off this loan, so total 30+25 days = 55 days of interest free credit. However, if you buy anything near the end of your billing cycle, like 4th Apr, then that will appear on the 5th Apr and you can pay off that in the next 25 days, so in this case total 26 days of interest-free credit.

How Credit card billing cycle works

Now this means that if you have any large purchase or any big-ticket size purchase to be made, it’s always better to make sure you do it exactly at the start of the billing cycle to get maximum out of your credit card.

The myth of Minimum Balance

Do you know that you start paying interest on your balance outstanding even if you have Rs 1 in outstanding? Yes, if you don’t pay off your full balance by the end of the grace period, you will be charged with the interest from that point of time. Even if you pay off the minimum balance, still you pay the interest on the rest of the outstanding balance. A lot of people live in this myth that just because they have paid the minimum balance, they will not pay the interest and can pay off the rest of the balance next time without any interest. This is totally wrong!

Paying the minimum balance is just going to make sure that you are not charged any penalty for late fees. That’s the reason “minimum balance” is there. The worst part of this whole minimum balance thing is that once you have any outstanding balance in your credit card, the concept of the grace period is lost. You keep on paying the interest on your outstanding balance at the end of your billing cycle. The grace period concept will only return once the 100% dues are cleared.

Impact of Minimum balance in credit card

This is one big reason why the credit card outstanding balance ballons to such a big amount once a person starts paying the only minimum balance. Let’s understand this with a picture.

Minimum balance is to make sure you don’t pay full?

Minimum balance is a trick, pure trick to make sure you pay less and get into a debt trap. Credit card companies know very well, that if they do not give any option to pay the minimum balance, people will have no other option than to think “let’s pay off my bill in full”. But they know that if they put an option saying “minimum balance”, most of the people will then think – “Ok! this month let me pay this small amount and next month I will settle the full amount.” Sadly this is the first step for most people to get into the debt trap, and this cycle never ends. As this strategy is a lifeline of credit card companies, they make sure they take full advantage of this.

How Psychology Affects Your Payment Behavior

A recent research study concluded that when a person looks at the amount of “minimum payment”, it can influence how much of his balance he decides to pay off each month. The study looked at how people’s behavior changed when they saw a specific number as “minimum balance” and when they did not see anything as “minimum balance”.

A random sample of 481 Americans was taken and divided into 2 groups . One group saw a mock credit-card statement showing a balance of $1,937, and an annual interest rate of 14%, but they didn’t saw any “minimum payment” option. However one the other hand, the other group also saw that the minimum payment of 2% of the balance was mandatory.

What they found is that people who did not see any minimum payment number desired to pay a higher amount of their balance — significantly more than 2% . Whereas people who were shown the minimum payment number were inclined to pay closer to 2% (meaning they’d be in debt longer)

Example of Ajay paying Minimum Balance

Let us see an example to understand all the concepts and working of credit cards. Let’s take an example of Ajay
credit card payment example

Suppose Ajay pays a minimum balance of Rs 300 and carries forward the outstanding balance for next month and also spends Rs 5,000 more in the next billing cycle.

In this case, as Ajay makes the minimum balance of Rs 300, then his outstanding balance would be Rs 9,700 as on due date (30th Apr). Now his total interest will be charged on this Rs 9,700 and that would be 3% of Rs 9,700 = Rs 291, which will be added to his outstanding amount and his final outstanding amount would be Rs 9,991 (just Rs 9 less than his original outstanding amount). Now as he carried forward an outstanding amount on his credit card, there is no concept of grace period. Now in this billing cycle as he has spent another Rs 5,000. That will be added to his old outstanding and the total would now be Rs 9,991 + 5,000 = Rs 14,991

Now this time, suppose his minimum balance is Rs 400 (just for example), and he pays it, then his outstanding balance will come down by Rs 400 and his final outstanding balance would be Rs 14,991 – 400 = 14,591. Now as there will be no grace period, he will be charged the interest of 3% on his outstanding balance of Rs 14,591, that’s 3% of 14,591 = 437.73 and will be added back to his outstanding, 14571 + 437.73 = 15,008 (approx)

Example of how Credit cards works

You can see that even after making the minimum balance he is actually having more than his previous outstanding amount because of interest paid. In case he does not pay the minimum balance also, in that case, he will also be charged a heavy penalty for late payment and that will be added back to his credit card debt. You can see how the minimum balance gets one into a debt trap.

Making Minimum payment affects your Credit Score

Do I need to give any other reason why one should stay away from minimum balance whenever possible? Making a minimum payment means not making full payment on time and the more number of times you do it, the worse your credit score gets each time. Read more on Improving your credit score here


Now you know all the terminologies in credit cards and how it works exactly. You also came to know about how minimum payments work and how it gets you into a debt trap. Try to make sure you become more responsible for your credit card payments. What do you think about it ? Give your views about this

358 replies on this article “Minimum Balance in Credit Card – How does it work ?”

  1. Mohammed says:

    Iam a new user just got my card recently.i didn’t even have an intention to get one but was convinced by the bank when I went there to open an account.the bank never cautioned me about how burdensome it can be if I used it carelessly instead they just went on and on explaining me the benefits.i thought that whenever I swipe I’ll have 50 days time to return the amount just didn’t knew about the billing cycle and grace thanks a lot you saved me from getting honey trapped.;-)

    1. Jagoinvestor Admin says:

      Hey Mohammed

      Glad to know that you liked the article.

      Please share it on your social media profile so that it can reach more and more people !


  2. Gopal Chhetri says:

    Hi Manish, this really opened my eyes. I have been paying only the minimum payment due for all three credit cards that i hold. What should I do now? Is it a good idea to pay the total outstanding at once and start fresh? Will it affect positively or negatively settling all the dues at once?

    1. It will affect positively. Paying minimum due for a very long time is very bad for your financial life. Dont do it.

      Make sure you pay the full outstanding and from now on keep paying the full every month.


  3. Govind says:

    Thanks Manish for nice insight.

    I need your expert advice if there is such interest/penalty also for Credit Limit reduction?

    Below is my present situation:
    I rented a car in US using my HDFC credit card. The rental agency have blocked 1184 USD as authorization.
    But HDFC have made my credit limit from 1,30,000 to 0 in this month’s billing cycle. Also the total amount due they showed is 81,973 INR while minimum amount due is 4100 INR. I did not had any other expenses for this billing cycle so its all due to car rental.

    Still will I have to bare heavy charges if I pay just minimum due amount, where the amount has been blocked as credit limit?

    I will pay with other card when I return the car so it should bring up my blocked credit to original but what about the interest/penalty?

    Please suggest the right way to do it to avoid interest/penalty in this case.


    1. Unless you pay the total dues, you will incur the penalty , there is no other rule to this.

      1. Govind says:

        Thank you Manish ?

  4. Pranav says:

    If there is an outstanding of 10000 on ICICI credit card what will be the minimum due amount? how is minimum due calculated what % of outstanding will be the min due

  5. avinash says:

    Hello Sir,

    This 3% interest is charged on monthly basis?
    And also what if i pay the total outstanding (14591 INR) on 10th day of bill,even then we have to pay the 3%?

    1. Avinash

      Yes its charged monthly. You need to pay your bills on the outstanding bill date otherwise you need to pay the fine. THe bill date anyways takes care of the grace period


  6. Sourabh says:

    Nice article very informative. Thanks

    1. Thanks for your comment Sourabh

  7. prem says:

    sir i am using hdfc credit card this month bill is generated there is of minimum due amount of 200 my bill is 9736 how much i need to pay this month.

  8. Diana says:

    Hello Manish

    Thank you very much for the detailed insight of the tricks of these guys!!


    1. Thanks for your comment Diana

  9. Shubham says:

    How do we pay credit card bill , is it automatically cut from saving account or th bank guy comes at our house to collect the payment ?

    1. You will have to manually pay it each month by logging into your bank/card portal via netbanking or through cheque. For some banks like ICICI , I know that you can setup a automatic payment each month.


  10. Amol says:

    Hello sir, My name is Amol. Due to some personal issue’s I couldn’t pay the EMI’s ( Home loan, credit card, education loan) time to time since 2 years. I was shocked to see my cibil score as 394. I’m not getting any credit card/loan from bank. How would I Improve my score? Will I able to transfer my home loan to another bank on this cibil 394 score? Help strongly needed.

    1. You need to first clear off all your loans ! .. only then your score will improve !

  11. Ray says:

    Let’s assume I have paid my insurance for 100,000 using my CCard. I have a minimum payable of 5000 or 100000.
    I opt for 5000 and the next month’s bill comes to 105000 again. Now I don’t have 105000 with me. I have only 30000 with me.
    A) Can I pay 30000 during the in-between period (The billing cycle). Or I MUST pay 105000 in full and settle all my dues in one shot? Will I be penalized if I pay 30000 during the billing cycle and the minimum balance at the end of thebilling cycle?
    Please help me. This is my real situation with SBI cc. They are charging 5% per month.

    1. Once you pay partial amount, you start paying interest on the full amount, hence its better to always pay the full amount


  12. Rajan says:

    Thank u … thank uniform heart , for your good advice … I & everyone using credit card needs to know this ,..

    1. Thanks for your comment Rajan

  13. Deepak says:

    Hi Manish,

    Say my due date is the 1st Jan and due amount is Rs 1000. If for some reason I miss the payment and realize this on 15th Jan. Next statement date being 13th Jan. I have spend another Rs 1000 till 15th Jan. So my total dues is Rs 2000 + late fees + interest + S.T., say Rs 3000. If I pay the entire amount of Rs 3000 on 15th Jan, will any purchases after 15th Jan attract interest. Or will I lose the grace period till the end of next billing cycle i.e. 13 Feb.


    1. You will have to pay interest till the time you make payment. I mean once you clear all payment , you will enjoy the credit free only after that , not before !

      1. kumar says:

        What is the interest rate if i take loan against SBI RD account.

  14. PBI says:

    Brilliant explanation!

    1. Thanks for your comment PBI

  15. dheeraj says:

    Thanks for clear explanation.

  16. badboy says:

    many many thanks to you. awesome explanation

    1. Thanks for your comment badboy

  17. Karthik says:

    I was thinking of paying only the minimum amount on my credit card statement, but this article helped me a lot.
    Thank you very much.

    1. Glad to know that Karthik ..

  18. vishwa says:

    Hi Manish

    am a new user of cerdit card i have more questions but when i see this msg am cleared now thanks

    thank you

  19. SUNIL says:

    by mistake this time the bill due dated 11/01/2016 Amounting
    Rs 25,875.45 has been paid by me on 11/01/2016 to the extent
    of Rs. 25,500.00.
    The Short payment Rs. 375.45 has cost me interest of Rs.
    2101.51 is not justified .
    Subsequently, I have paid Rs. 3,754.50 advance payment
    on 11/02/2016, i.e. 10 times of short payment of the said
    bill, I have no intention to delay your payment.

    and bank interest charge dt 23.12.15 to 23.01.16, how can possible interest charges all amount
    kindly suggest any body how can proceed this matter

    Thank you and Regards

    1. first see what is the reply given by the credit card company

  20. Dheeraj says:

    When does grace period return? From the day I pay 100% dues or next cycle?

  21. yoki says:

    I have booked bus ticket before the bill date but i cancelled that ticket after bill cycle and i got refunded. But the thing is refunded amount credited in available credit balance. ‘
    for example: booked for Rs.2000 before billing date
    bill generated with Rs.4000(including other purchases)
    after bill generated Rs.1777 refunded to available credit balance. Now i have to pay the bill Rs.4000. what is the solution for this? whether the amount 1777 will be credited to savings account?

  22. HEMANTH says:

    Hello , i am using the HDFC platinum credit card billing cycle 9 mar to 8 apr and last date to pay bill is 28 apr i bought the lap top worth of 50000 using EMI option on 10 mar and paid that month EMI on 9th apr . i have purchased 10000 worth goods using CC on 10th apr will i be charged interest for that 10000 from 10 th april onwards because i have outstanding of 45000 from laptop EMI.

    please advise on above scenario. the article is very helpful . thank you very much

    1. What is your question here ?

  23. BHARAT says:


    1. No , there is not minimum limit

  24. mukesh says:

    Hi Manish, Your post unwrapped many hidden facts, that i never notice while using credit cards. I have HDFC Platinum card, i am also one of physiologically fooled person who pays minimum amount to make sure that he skips interest part of it. But here some thing i do not understand, when i pay my minimum amount, sometime i have seen it directly debited into my account credit and sometime my credit amounts remain unchanged. please let me know it there any specific period under which i have to pay my minimum amount as per my billing cycle (10th of every month). And can i pay my bill in small amounts even after paying minimum amount.

    1. I think whats happening is that when you pay your minimum amount, you are not charged the penalty . Thats all . But the interest part has to be paid and instantly your interest part is added which makes you feel that your amount is unchanged . I think you should call to customer care and enquire are numbers level and understand whats going on !

      If you are not paying full amount on due date, you are loosing something somewhere and its not good. Dont do it

  25. Sush says:

    The example was very good but what if I have a cash crunch this month and pay the entire amount next month as in this exmple some i.e 14991 then its not a huge issue right?

    1. You are always at loss if you dont pay the full amount. I suggest never do it unless there is no option

  26. Ashwin says:

    I had a ICICI Bank Platinum Credit card it has a credit limit of 20,000.
    I want to purchase an apple laptop costs 62,000 on EMI for 24months
    I can do this????

    please answer as soon as possible…
    waiting for reply

    1. I dont think it would be possible

  27. abel says:

    I have a debt of 135000 in three different credit cards (total). Since last 2 years I’m strugling to close all the debts, can somebody help me to solve and get out of this trap. I’m paying just the minimum due always. Please help

    1. Hi abel

      I dont think there is any way out of this. You have already taken so much loan that paying off that is the only option. I suggest talk to some friend to help you on this .

  28. Raj says:

    Hi Rohan,

    DO not use CC. it is a trap from banks. You will feel free to use the card since you cannot feel the reduction of cash in hand. You ‘ll be given freedom to use the maximum limit. At end of billing you’ll be billed for full money and if you miss to pay fully they’ll charge 2.5% interest on billed amount. If you withdraw cash you’ll be billed cash+interest on daily basis + 300 as withdrawal fee. Throw the CC and place the closure request with cust care. get a No objection certificate.

    1. Hi Raj

      Thanks for your sharing your valuable comment on this topic. Please keep sharing your views in future also


  29. Rohan says:

    Hi Manish, Thanking you for such a wonderful and informative article.. I have a query here.. Since i am going to use cc for the first time. i am opting for EMI’s either 6 or 9. So i pay my regular Emi’s will they charge me any interest. Also if i swipe my CC on 29th of the month.. when will my Emi start..

    Waiting for the reply.

    1. Hi Rohan

      This is very specific query which you should follow up with the concerned authority only. We wont be able to comment on that


      1. Jyoti says:

        I am using a ICICI platinum CC for the first time. I have one confusion. My credit limit is 75k. I have spent 74k and paying the minimum amount every month. Can i buy a product which cost me 950 on monthly EMI basis for 12 months ?

        1. I dont think so . Your total amount will be counted

    2. manish says:

      Dear Rohan,

      DOnt go for EMI option. As I read about it that, it reduces your CIBIL score. because it shows that you are unable to pay your credit card bill at one go. I am also first time user of CC. I am using from alast 1 month. I was also confused on how to pau bill, when too pay etc. What I did, I paid the whole amount on30th days of my first purchase. So from next bill the picture will be clear. for the first 1 month you follow above strategy. That is what we can do. 🙂

  30. srini says:

    Very informative article. I’ve been using credit cards since 8 years but was not aware about the trap of minimum amount due trap by Banks which issue credit cards. I have HDFC Credit card with a limit of 1 lakh. I have used 78 K and paying the min amount due since six months. but now i realized i should act fast on paying the full payment.
    Thanks – Srini

    1. Hi srini

      In that case try to clear the debt asap

  31. Arjunlal says:

    Thanks a lot for explaining everything in detail, in understandable terms! Exactly what I have been looking for.

    1. Thanks for your comment Arjunlal

  32. Ashish says:


    Its really a nice article and make us understand the full working knowledge of credit card.

    Hats off to author. Cheers!!!! 🙂

    1. Glad to know that Ashish ..

  33. Ravi says:

    If I only pay minimum due then should I be liable to pay finance charge as well in next bill or I will have to pay only interest on the outstandings…..

    1. If you pay minimum balance, then you will not pay penalty for that month, But next again the same thing will happen . I suggest that you pay the full dues and not take the route of paying minimum balance

  34. Harminder says:

    Dear sir.
    I m Harminder Singh from amritsar punjAb. Me and my 4 friends apply for a hdfc bank credit card. We all openeed new acc. Our Account were prefreed. We maintain 20000 balance till we recieved cards. Bt m shocked that 2 friends got 1 lakh limit. Nd rest of 2 got 40000 only. We all never take any type of loan. I want to know how they set the limit. Nd y they r partial

    1. Only bank can share that .

  35. Shane says:

    Thanks, this is really useful.

  36. SouvikSarkar says:

    Hi Manish, a very clear understanding has been illustrated on credit cards payments and dues. Just to confirm, want your suggestion on my case. I have paid few bills amounting to Rs.4,540.82 using my HDFC Credit Card on the 6th of May,2015. My payment due date is 27th of June,2015 with a minimum amount of Rs.230. I wish to pay an amount of Rs.1000 before due date and the rest of the outstanding on the 1st or 2nd of July,2015. Is it a good idea to do so or will I be charged interest if I don’t pay the outstanding amount on the 27th of June,2015. Would be very obliged if you could suggest on this.

    1. Yes, you will be charged . So better pay on time only

  37. Dinesh says:

    Awesome information bro. Cant explain this any better. Thanks.

    1. Welcome .. Glad to know that Dinesh ..

  38. Kunal says:

    Really very nice article. Explained in very simple language. Thank you very much.

    1. Thanks for your comment Kunal

      1. SUDHEER says:

        my credit card having rs 150 minus balance and tomorrow is billing date.can i avoid fine by paying minus balance amount

        1. Yes, in this case, better pay minimum balance and later pay the full .

  39. neel says:

    Dear actually I am getting salary end of month is 14000 so can you please which bank giving the credit card and which is best for this? Also I am doing government job class 3 and m still working since 2014(Nov)..please assist me ..thanks

    1. I think most of the companies put the restriction of atleast 20-25k salary per month for getting a credit card

  40. Jimmy says:

    This is Simple yet Excellent Explanation.

    Thanks a lot

    1. Thanks for your comment Jimmy

  41. Allwyn Mathias says:

    Very informative article Manish.
    This definitely helped me understand the lifecycle.


    1. Thanks for your comment Allwyn Mathias

  42. dom says:

    Do you have a spread sheet to manage credit card

  43. krishna says:

    As long as you are repaying the minimum amount due (usually 5% of the total outstanding) by the due date, it would not be considered as a late payment. The balance amount (i.e. Rs. 7,000) would be carried forward to the next billing cycle. Interest would be charged on Rs. 7,000 from 8th May till the date when you clear this balance i.e. either next due date or any date before due date.

  44. chandan singh says:

    I m holding a icici credit card . but limit is very low my salary is 30000 pm. i got the card last month only i have not completed a billing cycle. can i apply 4 a another credit card.. if not thn when should i apply

    1. You can ask your bank to raise your credit limit once you spend 3-4 months . I dont think its a great idea to apply for another credit card so fast !

  45. chandan singh says:

    does emi affect credit score…. if i shop for 50000 and converted in to emi … wat it means?

    1. Yes, it will affect your score . Its called Restructuring of loan and ideally should not be done !

  46. Aditya says:

    I am planning to buy an iphone 6 on credit card emi.
    I want to know that if i swipe 70,000Rs from my card on emi scheme then my whole card limit of amount i swipe will be blocked or just the respective amount of emi i need to pay will be blocked for every month??
    Like i am having card limit of 1,00,000Rs and right now i swipe 70,000Rs on emi format then my 70,000Rs will be blocked from the time i swipe or just amount of emi say 10,00Rs will be blocked for every month till i complete my emi..?
    I hope you are getting what i mean to ask because this stuff is bit confusing me.
    Really need your guidance ASAP.
    and your article is great.. very well written with explanations n all.. 🙂

    1. The whole amount will be blocked . Its because your bank has paid full 70k to the seller and now charging you EMI

  47. Saranya says:

    I have paid much amount as late payment fee and dishonesty fee. I thought they premium amount will be deducted from my account automatically, but due to bank holiday or some other reason, it got delay. hence I was made to pay extra amount as late payment fee and dishonesty fee. Later only i understood and I started pay myself before the due date.

    Could you please let me know, is there any possibility to reclaim this amount paid by me.

    Thank You

    1. Its great to know

      If you wait for last date, these kind of issues will happen for sure . Better pay 5 days in advance itself !

  48. Ritesh Raghuvanshi says:

    very helpful and informative article

  49. Saam Abbas says:

    Very Good Article, I came here to know the concept of minimum balance after getting the SMS from my bank to pay the minimum balance and this article really have opened my eyes. 🙂

    Thanks Manish!

  50. Deepandhiran Ramasamy says:

    Nice Manish, Really it is a fantastic and very helpful article.

  51. Sandeep Kumar says:

    Excellent and Thank a lot, very help full to understand the whole procedure related credit card!

  52. Madhan a says:

    Really great article. I came to know how mininum balance payment type eats our earning.

    1. Thanks Madhan 🙂

  53. chetan says:

    great job manish…

  54. Rabeesh R says:

    Hi Manish,

    That’s indeed a valuable article and I would like to have clarity on one more thing

    I have a doubt regarding this credit card payment.Suppose, I have a bill amount 17000 to pay by 7th of May. But what if I pay only 10000 and would like to pay the remaining 7000 rs by next month’s bill. How much extra charge will be levied for that? Also I am planning to make a purchase of another 10000 in between May 8th to May 18th (next bill cycle) . How much bill its gonna be come for me for May’s bill cycle? Please help.


    1. Credexpert says:

      Dear Rabeesh,

      As long as you are repaying the minimum amount due (usually 5% of the total outstanding) by the due date, it would not be considered as a late payment. The balance amount (i.e. Rs. 7,000) would be carried forward to the next billing cycle. Interest would be charged on Rs. 7,000 from 8th May till the date when you clear this balance i.e. either next due date or any date before due date.

      Any additional purchases made in the next billing cycle would be added to this amount of Rs. 7,000. Since credit cards are high interest credit facilities i.e. 36-40% p.a., repaying minimum amounts should always be avoided.


    2. Note that you will only save PENALTY CHARGES if you have partial sum (whatever be the amount) . If you dont pay 100% money , then you will be paying the interest on the FULL AMOUNT

      So either pay 17000 .


      Pay less (10,000) and pay 3.5% of 17000 = close to 600-700 as charges . So this 600-700 will be added to your next bill + 7000 (amount remaining last time) and you do not get any grace period also next time unless you pay the full amount !

  55. Varun says:

    Great information indeed. But does the same logic of minimum and maximum balance apply if I buy goods at EMI using credit card?

  56. Prateek says:

    I am a new credit card user. My CC shows a credit balance of INR 3510. what does this exactly mean ? A credit balance in my savings bank A/c means positive balance in my a/c but how did this happen to my credit card a/c ? Will this amount stay in my card till i do a shopping of that much from my cc ? Will i get any interest for the amount ?

    1. You might have paid more than required amount or some cancellation must have happened and money might have come back , thats why the positive credit

    2. Credexpert says:

      Dear Prateek,

      The credit balance on your credit card means that you have paid more than the outstanding balance or there was a refund due to cancellation. This amount would be set off against your next purchase.

      And, no, you would not be earning any interest on this amount.


      1. Prateek says:

        Thanks Manish & Credexpert. Yes I did get a refund

  57. Vivek says:

    Thanks a lot for the crisp explanation.
    The “How Billing Cycle and Grace Period Works in Credit Cards” diagram explained exactly what I wanted to know.

  58. Shiv says:

    Very very nice post its very useful article.


  59. Muthukumaran says:

    Dear Manish Sir,
    i am having 516 Rs in my SBI master card, i need urgently 3oo Rs for applying exam through online, is it possible to pay
    whats the grace period for SBI account holder to return back the 300 Rs.

    1. Why will you get the money in return ?

  60. Raghu Kuna says:

    Thanks, Very useful information.

      1. Rahul says:

        Available balance on credit is 15k can i able use whole amount 15k for purchasing ??
        Pls clarify….

  61. Bala says:

    Hi Manish Chauhan,

    Can you please share our knowledge on annual fee?

    I am little confused of annual fee, i want to know, is it mandatory to pay it every annual?

    1. There are two kind of cards – FREE And PAID . FREE cards offer basic features and PAID one offer supirior features . And you have to pay every year for it . Some cards are offered for FREE for first year and after that you have to pay each year

  62. Mangesh says:

    Hi Manish,

    Really useful article, nicely explained, easy to understand!


  63. Credexpert says:

    Dear Mr. Alam,
    Banks have various categories of credit cards, the credit limit and eligibility criteria on each of these credit cards vary. We would request you to check with the bank as to which type of credit card can be issued to you based on your salary.

    We would request to make sure that there are no hidden charges, annual fees, and any other charges which can burden you if you miss the payment on your credit card.

    Credit Card issuers also have their internal parameters for issuing credit cards, so they might pull your credit bureau report to check your credit worthiness and this will be clubbed with their internal credit parameters.

    As a precautionary measure, we would request you proactively to check your credit bureau score and make sure that the possibility of rejection on your credit card application is minimised.
    You can pull your credit bureau report free by applying to our services and monitor it on a continuous basis.


  64. iftkhar alam says:

    Dear sir
    to purchase credit card on the basis of salery account..and what will be minimum salery reqquired for purchasing credit card for HDFC bank……..i am very doughtfull and very needy person of credit card plz confirm it min amount for issuing credit card.
    waiting for ur valuable reply
    thanking you

    1. Credexpert says:

      Dear Mr. Alam,

      Banks have various categories of credit cards, the credit limit and eligibility criteria on each of these credit cards vary. We would request you to check with the bank as to which type of credit card can be issued to you based on your salary.
      We would request to make sure that there are no hidden charges, annual fees, and any other charges which can burden you if you miss the payment on your credit card.

      Credit Card issuers also have their internal parameters for issuing credit cards, so they might pull your credit bureau report to check your credit worthiness and this will be clubbed with their internal credit parameters.

      As a precautionary measure, we would request you proactively to check your credit bureau score and make sure that the possibility of rejection on your credit card application is minimised.

      You can pull your credit bureau report free by applying to our services and monitor it on a continuous basis.


    2. Credexpert says:

      Dear Mr. Alam,
      Banks have various categories of credit cards, the credit limit and eligibility criteria on each of these credit cards vary. We would request you to check with the bank as to which type of credit card can be issued to you based on your salary.

      We would request to make sure that there are no hidden charges, annual fees, and any other charges which can burden you if you miss the payment on your credit card.

      Credit Card issuers also have their internal parameters for issuing credit cards, so they might pull your credit bureau report to check your credit worthiness and this will be clubbed with their internal credit parameters.

      As a precautionary measure, we would request you proactively to check your credit bureau score and make sure that the possibility of rejection on your credit card application is minimised.

      You can pull your credit bureau report free by applying to our services and monitor it on a continuous basis.


    3. You cant buy credit card. you need to apply for it .

  65. sajith says:

    great effort… useful to credit card users.

  66. Karthik says:

    Nice post its very useful for a leamen person….Thanks

  67. kiran says:

    Hi Manish ,

    Thanks for sharing this info on web , it is really helpful to me. I recently got
    credit card from HDFC bank . I was unaware of this minimum billing cycle .

    Thanks for your help

    1. Good that you are now clear about it

  68. Manoj says:

    Hi Manish,

    Thanks for the article. I have one doubt regarding the payment being made for the credit cards. For eg my total amount to be paid at the end of the billing cycle is 36000, and i am making payment of 24000. The balance now is 12000. How will the interest be calculated now. Will it be calculated on the balance amount of Rs.12000, or the entire 36000 until the dues are finished. I am currently fighting with a bank who are charging fradulently like this. Your reply will be greatly helpful.

    1. Credexpert says:

      Dear Manoj,

      The interest would be calculated on the outstanding balance of Rs. 12,000. Since the interest rates charged on credit cards are as high as 36 -40% p.a., we would suggest that you always repay the complete outstanding amount against your credit card.


    2. It will be charged on the WHOLE amount, thats how it works ! .

  69. Credexpert says:

    Dear Rahul,

    Yes, Krish’s credit limit would be reset to Rs. 29100 after he repays the 1st installment of Rs. 4100 (i.e Rs 25000 + 4100). The bank would not charge any interest for him since the payment is structured as an EMI payment.

    Since your card is a secured credit card (availed against fixed deposit), we would suggest that you check with the bank if an EMI option is available to you and the grace period as well. This would provide clarity on the 0% EMI being available for a secured credit card.


  70. Rahul says:

    Dear Manish,
    First of all thanks for your nice article. Even the comments here are helpful for some decisions for me. However, being a half-knowledgeable person, i want guidance from you on following. Hope you can clear my doubts as bank officials is not giving proper answer. (He was saying to contact online store CC)
    I want to purchase a mobile from an online store, which cost around 15K. Instead of paying whole amount, looking for getting a instant credit card from ICICI bank by just keeping 20K in FD with them for 180 days. (Planning to get the card as it will help me to improve my CIBIL score. Bhai kahi se to shuru karna padega score improve karna..)
    But when i went thro’ their terms, online, its written “…On the EMI Card, there is no interest-free grace period.” When i read the comments nos. 155 to 158, the balance on Krish’s card remains 25K during first cycle. Assuming, 4100 as EMI, will his balance increase to 29100? (assuming he paid the amount before due date.). so will bank charge interest during tenure of loan period? In other words, will credit card bank charge him interest for not paying 25K completely in first cycle? The online site mentioned as 0% EMI, so is it by any way, another trap too?

    1. I suggest not doing this . Why do you want to keep the FD and then pay monthly out of your pocket . Give its just a matter of few months, I suggest pay in Cash and rebuilt your 20k !

  71. Gagan Deep Bhargav says:

    Hi Manish,

    By chance I got this website and I am feeling very lucky. Thanks very much for detailed information much appreciated.

    Now the problem is that I am going to make the payment of “minimum due amount” against my CC due to unforeseen financial circumstances . My CC statement will generate on 05th June’2013 and the amount will be 28,000.00.

    Now what is in my mind that I will pay 15,000.00 this time and for rest of the money I will make the payment before next statement date which would be 05th July’2013.

    So could you please be kind enough to tell me the effect of this on to my credit history( current CIBIL score 766) and how much interest I have to bear.

    Your response would be much much appreciated.

    Thank you very much.

    Gagan Deep Bhargav

    1. Credexpert says:

      Dear Mr. Bhargav,

      You as a borrower have an option to pay a minimum amount by the due date and carry forward the balance to the next billing period. In this case, you will pay interest on the amount that is carried forward. No grace period will be allowed to you on the new purchases when the balance is carried forward from one cycle to another.

      Since there are no late payments it will have no effect on your CIBIL score but you will be charged with an interest on the outstanding balance of ₹ 13,000 approx. As interest on credit cards are as high 36 – 40 % p.a., you can end up paying anything between ₹ 400 -500 p.m. approx as interest.


  72. Hemanth says:

    Hi Manish,

    I have a card of limit 20k, can I want to buy a phone of 38k on emi basis (12 months) how can I do it?

    1. Credexpert says:

      Dear Hemanth,

      Since the card has a limit of only Rs. 20,000, you would not be able to make a purchase of Rs. 38,000. Also we assume some portion of this credit limit could be utilised by you in your earlier purchases and the limit would be reset to Rs.20,000 only after you repay them.

      You could try the option of splitting the payment into part cash and part credit card in a ratio that you are comfortable with such that you are within your credit limit and your servicing capacity is also not affected. But do check if the EMI option would still exist.


      1. Hemanth says:

        Thanks a lot for the info..I have this card from two months I have paid the dues and the limit is reset. To increase the credit limit they see how disciplined we are in payment and increse or does it depend only ont he transaction? and is there any fixed period I need to wait to extend limit of the card?

        1. Credexpert says:

          Dear Mr. Hemanth,

          Credit card issuers evaluate the credit history of an individual to increase the limit of a credit card. However, since you have used the card only for 2 months, there would not be much history to evaluate.

          Do you have any other credit cards / loans? If yes then, how are your payments on them? If your overall credit behaviour is disciplined then, you could approach the credit card issuer and request them to increase the limit based on your overall credit history.


    2. You cant .. In one go , you can only swipe max 20k .

  73. Bharath Gurram says:


    Last Year I mean 2011, In the August Month I’ve to pay a amount of less than 500 as my CC bill. Date of Payment is 25th and My Billing cycle is 5th of every month.

    Unfortunately, I was no able to pay that bill on 25th. I forgot. I saw it on 27th and paid it. My Billing cycle is 5th of every month.

    Will this effect my CIBIL Score? My Card is SBI against Fixed Deposit.


    1. Credexpert says:

      Dear Mr. Gurram,

      No the affect of this late payment on your score if any would be minimal because:

      • The late payment was in a range of by 002 – 010 days (assuming you paid by cheque and including the days for cheque transfer)
      • The late payment was in 2011 which is not recent
      • The amount was only Rs. 500
      • SBI card is a secured card against FD


      1. Bharath Gurram says:

        Thanks Credexpert.

    2. NO much .. It might be reported in your DPD section , but thats all !

      1. Bharath Gurram says:

        Thanks, Manish.

  74. Rajeev says:

    Dear Manish

    I am using HDFC credit card for past 2 years and i use to pay my dues ontime.Since I am paying my dues ontime, In this period bank offered me extension of my grace period for 3 months without interest.For Example I can pay my august,September,October month spending with my november month billing cycle without any interest.I used it and repayed it ontime(means payed 3 months due in november)I know its a trap:)but l i didint fall into it.Twice they gave this offer I utilised it and repayed ontime.My question is does this affect my CIBIL score?

    1. No it should not.. When there is no interest, means there is no question of default 🙂 .

      1. Credexpert says:

        Dear Rajeev,

        The bank offered you an extension in the grace period basis your disciplined credit behaviour. This would not affect your score but can lure you to use the card for a higher transaction.


  75. Sachin says:


    My credit Score is 759 and I have currently 3 active credit card and total due is around 90000 . I had earlier closed my personal loan and 3 more credit card by paying the full amount.
    Will i get the Home Loan?

    1. Sachin

      Is this 90k amount on credit card pending from long or is it current month Dues ? If its pending from long, this is not a good sign . Better close it off asap and only then your chances of getting a loan will rise

    2. Credexpert says:

      Dear Sachin,

      759 is a decent score but a higher score is always advisable. It would be difficult to comment on whether you home loan application would be sanctioned as the lender would also consider the factors that have impacted the score like, late payments, no. of secured and unsecured credit and outstanding amounts.

      Rs. 90000 outstanding on credit card is a high amount and the lender may view your report negatively as this implies that you are already burdened with payments. If your cash flows allow you to clear these outstanding then please do so before applying for home loan.


  76. Sandeep says:

    Thank u very much for your time Manish, I was actually trying to find what exactly is a minimum due. superbly written, thank u for the valuable information.

      1. ABHISHEK says:

        really helpful and truthful artical about credit card………for freshers in this era also users……….it clears comp lit pictures about credit card thanks a lot

        1. Thanks for appreciation

  77. Sameer says:

    Hi manish,

    I wanted to know if my oustanding balance is ex(10000)aftr the bill is gnrtd, and my mimimum bill is ex-650….but i cant pay the whole outstanding amount alternatively i can pay more than my minimum bill (more than 650)….if i pay 5000….wat ill happen and how will it get worked out…….

    1. if you pay 5000, you will not be charged any penalty (as you are paying more than minimum) , but then you will have dues and will have to pay interest on the amount .

    2. Credexpert says:

      Dear Sameer,

      If you pay the minimum amount or more than the minimum amount (in your case Rs. 5,000) before the due date, you will not be charged any penalty for late payments.

      However, interest will be charged on the balance outstanding. We would advise that you pay the entire outstanding as interest charged on credit cards is as high as 35- 40% pa.


  78. Jaspreet says:

    That is really a superb article. Thanks for such meaningful information!
    i have a question though… if my credit card bill on due date is 10k and i pay more than 10k as a bill before due date then wat will happen?
    will the amount get transfered back or my credit limit will increase?

    I am asking this because i booked flights with my HDFC CC but due to some reason i had to cancel them. Now the amount will be refunded in 4-5 days but before that my CC due date will arive.
    So i am not sure how much bill to pay 🙁

    1. Credexpert says:

      Dear Jaspreet,

      No, your credit limit will not increase if you pay more than the outstanding amount on your credit card.

      Since your card due date is before the refund date you will have to pay the credit card bill from your own sources. Once the refund is done to your card it will get adjusted in any future purchases made by you.


    2. If you have paid MORE , you will have negative balance in your account and next time it will be adjusted. On any given due date, the online account you have will tell you what is the outstanding amount.

      1. Jaspreet says:

        Thanks for the insight.

  79. Ganesh Datt Sharma says:

    please publish an article on the online shopping fraud like and the ways how to get refund from this type of sites and detailed information on charge back facility in credit card, debit card and internet banking.

    as you do some googling for you will become aware of how daylight robberies are done by this online shopping site.

    1. Ok , thanks for sharing that . will do some article on that

  80. krishna says:

    Minimum Balance in Credit Card – How does it work is very understanding language……
    thank you for valiable information..

  81. Raj says:

    Yes Good Nice article I appreciate your hard work and

    Thanks for sharing the info

  82. Dinesh Kamath says:

    I actually checked with the customer care (even before posting the question here) about paying the credit card bill through my HDFC netbanking to my credit card bill via autopay (on last day of grace period), they said it is not possible and you might need to do it manually. I will try directly talking to the bank officials and see if i can pay atleast say 3 to 4 days (as you suggested) prior to last date. I hope standing instructions can be given (but i think standing instructions only hold for fixed amount and not varying bill amount). Let me know if there are any other way of auto payment.

    1. I would suggest do not rely on them , there are many who asked customer care and they said that its not possible . but Its actually possible , customer care does not know this point actually !

      1. Dinesh Kamath says:

        Thanks Manish. I will talk to the bank officials directly.

      2. Dinesh Kamath says:


        I discussed with the credit bank officials in-person. The call center executives were wrong (they said amount will be deducted on the billing date), the amount is deducted on the last day of the grace period itself (not earlier or later to that) and this is same that happens if i register Auto-pay option of Total Amount Due in netbanking. Hence my question is answered

  83. Credexpert says:

    Dear Mr. Kamath,

    Whilst understand that you want to enjoy the grace period to its maximum, we would suggest that you check with the bank if you are allowed to set the auto – pay date of your choice.

    If No, then the option would be to change your mode of payment, which we assume you are not willing to.

    If Yes then, in interest of maintaining a healthy credit report, we would recommend that you set the auto – pay date 3-4 days before the grace period ends. There could be possibilities of delay in the auto – pay on the last day of the grace period due to technical glitch, non – availability of funds in your account or for any other reasons. These delays have the potential of affecting your credit report and score.


  84. Dinesh Kamath says:

    I want to pay my HDFC credit card complete bill amount on the last day of graceperiod automatically from my savings bank account of HDFC (salary account). There is a option named auto-pay only to pay credit card bill on the billing date, but i want it to pay on the last day of graceperiod.. Let me know if its possible to do so.. Idea is to enjoy interest free credit to max and also automating the payment.

    1. Yes, you can start a ECS for that !

  85. Rahul Kale says:

    Hello Manish,

    Excellent article 🙂

    I have a query regarding credit card bill.

    I have to make a purchase of around 24K with my credit card, But I have used 5k out of the 25K limit on my credit card. Thus my current credit balance is 20K.
    Can I pay the credit card bill before statement so as to increase my credit limit ?


    1. Yes, it will help if you clear the dues. your limit will go up for the month by that margin !

    2. Credexpert says:

      Dear Mr. Kale,

      Repaying Rs.5,000 will bring back your credit limit to Rs.25,000; allowing you to make a purchase of Rs.24,000. This will not “increase” your credit limit but will only restore it to the original limit.


      1. Rahul Kale says:

        Thanks for the infor both… 🙂

        I can confirm that I was able to increase my limit to 24 k with the payment.

  86. krish says:

    Hi i have a doubt, my credit card credit limit is 50k. I shopped online for 25k on EMI option(for 6 month). Thats some were around 4100k per month. But as soon as i shopped i got a message saying u have shopped for 25k on EMI. When i check my available credit limit it shows 25k.. How does this work?? I thought my balance is 46k as 4k is the EMI for this month. Please help. Thx

    1. No no , thats not how it works .. It will be the total amount you can shop for ! .. if it worked the way you can , then you can also buy a home for 50 lacs with EMI option whose monthly EMI is less than 50k , because your credit limit is below that, right ?

      But you know its not true .. just think from lender point of view, I dont even need to explain !

      1. Sarim Azeem says:

        So, you are saying, for next six months krish’s credit limit will stuck to 25 k.

        1. NO , i commented on his comment whcih says “I thought my balance is 46k as 4k is the EMI for this month. Please help. Thx”

          The remaining credit limit is 25k more , because total was 50 and he used 25k out of that !

          1. Sourav says:

            As my balance deducted is 25k, do i need to pay 25k on my due date or just 4K

  87. Vikram Jain says:

    Hi Manish,
    I am vikram ,i had a salary account in RBS last year,this year our company has shifted account to SBI .RBS has a clause of minimum amount of Rs 10,000 to be kept in savings account,for two months my balance was below 10,000.
    will this affect my credit scores?does closing a bank account also affetcs the credit score?
    Please help.

    1. No it will not affect your Credit Report !

  88. Mrinal says:

    It was great. Really!!! For first time in life I understood how this Minimum Balance thing works. Now I will make a tendency to pay as much as possible and just not the minimum balance.

    Example of Ajay really made me understand that why I am not out of my previous debt. Brilliant case study.

    Thank you.

    1. Thanks Mrinal ! .. Glad to know you liked it , please share it with more and more people

  89. Rishi says:

    Hi Manish,

    Thanks for such an useful insight. I wanted to know one thing and it will be a great favor if you can help me with it. What happens to EMIs of a purchase earlier made with an EMI option but later canceled;do we still needto pay the EMIs even if the original transaction is canceled. I had made a flight booking, under EMI option, which i canceled later, but the bank people are telling I still need to make paymnt of the EMIs!

    Your reply will be of great help

    1. No that can not happen . the issue here is that the payment for money has been made from bank to the flight booking company , now bank will ask you to make payment through EMI , you have to follow back with the booking company on this

      And its suggested that dont make these kind of purchases on EMI basis .

  90. Yesh says:

    I also got into myth that paying minimum balnace would not lead to any interest on rest of the amount. I ended up paying extra money on next billing cycle but could not understand the calculation. Now i understood . Thanks for this useful info as always.

    1. Great to hear that Yesh .. so your cibil score is good ?

  91. harish kon says:

    Hi Manish,

    Very Thanks for the info,
    I actually started searching for the explanation of credit card pros and cons today and i got everything from this page, i think.

    Now, i have some interesting question
    Say i have 2 credit cards A and B. I make a transaction of ‘x’ amount from card ‘A’ and when the bill is generated for card ‘A’, I’ll pay that through card ‘B’. Again when the bill generated for card ‘B’, I’ll pay that through card ‘A’. Finally ending up not paying anything to either of the banks. Is this possible.??

    1. It can work , but how will you make the payment to one credit card using another credit card ? Also its like playing with the situation ? Who will manage this cycle for all life ?


  92. Pradeep Sarkar says:

    Hi Manish,

    I have just one concern. I want to buy a laptop online on my HDFC credit card with 9 months EMI option. Online website people informed that they will charge me 1500 as processing fee. Do I need to worry for any other charges on my credit card?

    1. No , I think it should be ok , but you will have to pay EMI .

  93. SAJITH says:

    Good one Manish !!

  94. SAJITH says:

    I am newbie regarding the credit card usage and was browsing through internet to see, how CC works and its pros and Cons. Very happy to read this interesting article, said in a layman’s language.

    Our company just got into a tie-up with a credit card issuing bank, so lot of my colleagues also got the card, and ofcourse they are newbies too !!.Just shared this article with them, when they acknowledged saying it was a very nice read.. Well done Manish..

    2 questions out of interest ? We dont have any annual maintenance fee levied, in that case is it totally free, if i am paying any outstanding payments all on grace period ?

    I have hereby acquired some loyalty points..How loyalty points work, and where it can be reedemed..

    Thanks in advance.

    1. Sajith

      See that everything is in writing ,the loyalty points can only be described by the company .

  95. Sandeep says:

    I have oner query regarding EMI on credit card
    suppose i have a credit limit of 30k and i need to purchase something of 35K on EMI option for 6 moths so that i need to pay only 5833(aprox) every month.

    Is it possible. will this transaction be declined due to insufficient credit limit? If so, is there any option by which i can buy it in EMI option via credit card ?

    1. I think it will be denied as it is going above your credit limit , you cant buy it in one shot , but you can distribute it in two months !

  96. Sahana says:

    Hi Manish,

    Thanks for the post. I have a query. My credit card billing date is on 24th and I have asked to payment due is immediate next month of 10th. I had made a purchase on 22nd. I have used maximum amount.
    Can I make an another transaction on 5th, without paying the previous amount.


    1. You can make another transaction , but the point is you will pay the interest now with late payment , while you can transact if its extremelly urgent , i dont suggest it . please avoid it

      1. sahana says:

        So, if the billing date is on 24th, and if the credit limit is 70,000. 1,40,000 can be used in a month right? 22nd (70,000) and 28th(70,000). Please suggest

  97. Srinivas Murthy says:

    am planing to apply HDFC, SBI Credit Card, can u suggest me which is best one..

    Srinivas Murthy S.

  98. Kiran says:

    great article.. neat and simple to understand..

    this shud save many lives to get in debt trap.. 🙂

  99. Krishna says:

    Great article..Totally helpful for people like me. Thanks a lot. My best wishes.

  100. I have one doubt…Sometimes I forget to pay on time, that is one day before or after due date..I have never charged any late fee from the bank does it affects my credit score???Kindly clear me..

    1. If you dont pay on time, you must be paying more , it just gets added into your next bill, you might not be realising it . Yes it affects your score a bit , not in a very big way, but it does .

  101. Karan Batra says:

    Thanks Manish for highlighting the fact that the concept of Grace Period does not apply in case of Minimum Balance.

    I didnt know this thing and I’m sure 99% of Credit Card users would also be unaware of the same.

    So do you think that in case someone is facing a credit crunch, he should try to pay the Credit Card Bill in full through another Credit Card and thereby get extra credit period rather than opting for minimum payment

    1. Yes , thats a really great point ! 🙂

  102. Rajendran says:

    Hi Manish,

    What if i pay the minimum balance on due date and the remaining amount on next day. My case is simple, i have enabled auto ECS for minimum balance on my AXIS card so minimum balance has been transfered automatically on the payment date and the very next day i paid the remaining amount.

    I think as you said in this case grace period is gone and i will be charged by interest for the entire month. i have also made purpose for 4000 for the current billing cycle. don’t get me wrong this question should have been raised in AXIS CC forum.

    Please correct me if am wrong.

    1. Dont do this , you will have to pay the interest in that case , what are you getting anyways by delaying for a day ?

  103. Tabrez says:

    Hi, i am a student doing 2nd year…. To get a sbi credit card, should we pay any annual charges? do we need to maintain a minimum balance in our bank account?
    Is there any minimum amount 2 buy from a credit card? please reply..

    1. There are cards with annual charges , but there are many which are not , better if you get a card which does not have a charge yearly , but in worst case you can pay

      There is no minimum amount you need to spend on card each month , nor there is compulsion to have any minimum balance in your bank account, they are not related. I would suggest read more on credit cards here :

  104. ravi says:

    Excellent article

  105. Promod says:

    Hi Manish,
    I had a point to find out. I came across few folks asking what if I suddenly wanted a big credit from my credit card which is beyond my current credit limit? However going for an increase in the credit limit at that time would not be possible (and moreover not required in the future).
    Can I ‘pay’ extra into my credit card (via online) so that the balance shows ‘negative’ and then go in for that big purchase? For eg:
    If credit limit is x/-; My current outstanding is 0/-. I still pay my credit card say, y/- so that the statement shows now ‘-y/-‘. I then can make a maximum purchase of x+y right?? 🙂

    1. I am not aware if this is possible, can you start a thread on , I am sure we both we get an answer 🙂

      1. Prabhakar says:

        Hi Manish,
        My credit card statement shows negative total amount due so that means the bank owes me or i owe to bank?

  106. Raj Shekhar says:


    I just can’t belive myself when I preached the concept of paying Minimum Balance to my wife and brother. Inspite of my wife suggesting to pay off the entire amount outstanding, it was foolish of me to brainwash her to pay the minimum due and get away with that. Your article was really enlightening to me and from now on I shall ensure that I try to stay away from the ‘debt-trap’ by my bank akin to others as well.
    I can keep writing thank you notes to you over this eye-opener article,however in the larger interest of all, it is really appreciative on your part to make us all aware of the ways to stay financially afloat.
    Great many thanks.
    PS: BTW, A few months ago, I hit upon your site while seeking advices on Home Loans. Now, I bought a house and settled for a HDFC Loan. Burdened by the EMI’s already(principle gets diminished by meagre amounts whereas interest peaks by the month), please suggest if you have any innovative thoughts about reducing the burdens,either in short or longer term.

    1. Good to hear that .. correcting your mistakes and accepting you made a mistake is great thing . This is a sign of being a learner ! 🙂 . Best of luck with your home , all I can say is there is nothing innovative in paying off the loan other than a simple thing – “Prepay whenever you can.. ”


      1. Chandra says:

        Hi Manish,
        it is great article. i learnt cycle of credit card. i have one question. i used credit of 1.5 Lakh can i close at time? or can pay monthly 10K (10*15 =15K).the reason is i am planning do part payment 1.5 Lakh home loan if do so my tenure coming down approximately 30 EMI. I am saving 30 months interest right on home.
        i am but confuse I appreciate your reply .

        1. I am not sure of your question. I assume you asked if you can pay 1.5 lacs from you credit card , you can do so , but you will have to repay that next month else charges will apply !

          1. Chandra says:


            my credit card outstanding is 1.5 lakh. i have cash i can pay completely.
            Instead can i use this amount to pay home loan as a part payment. For credit card people i am planning to pay every month 10K or 15K which is benefit paying credit card or part payment for home loan?

            1. Paying off the credit card money would be more useful , credit card interest is 45% yearly , home loan would be just 12-13% max

  107. Dinesh says:

    Hi Manish,

    Thanks for the Info on CC,
    some merchants give you cash when you swipe CC but without your any purchases, they get the cash and the merchants charge you some interests, people who need immediate cash from CC they dont go to ATM but they look for some merchants who give you cash by swipping card.

    1. If you are ok with it and it makes sense for a person financially you can do that, no harm in that

  108. sameer says:

    Hi Manish,

    Thanks for explaining and I too a victim of minimum balance debt trap.

    I’ll will be free from debt this fiscal by paying my credit payment in full.



    1. Great to hear that .. it will pay off in long term to you

  109. Sagar says:

    Really helped me allot


    Please also include discussion on 5 year tax saver Fixed deposit.

    1. What info you want on tax saving FD ?

  110. Nitin says:

    Ye, thanks a lot Manish!

  111. Nitin says:

    Manish, thanks for your response. But I did this in last month and to my surprise, the bank did not charged any interest/ charges for this 🙂

    1. Thats strange .. but good to know that you were not charged for this, not sure why

  112. Nitin says:

    I’ve one question- Say my billing cycle is 04 to 03 of every month i.e. my CC bill gets generated on 04th of every month. And my due date it 23rd of every month.

    Now for e.g. My CC bill for May-12 is Rs 15000 and I pay Rs 10000 on (or before) 23rd May-12. And then I pay the remaining Rs 5000 on say 31 May-12. What will happen in this case?

    Will there be any interest applicable as I’ve not made the full payment before the due date?

    1. Obviously .. you will pay the interest , making minimum payment just saves you from the penalty , thats all .. interest will be charged anyways

  113. SivaPatnani says:

    Nice article!.

  114. Jagadees says:

    I did not know about this point: “The worst part of this whole minimum balance thing is that once you have any outstanding balance in your credit card, the concept of grace period is lost ”
    I always learn something new from your articles 🙂

  115. Anuj Agarwal says:

    Heyy thanks a lot for the brilliant blogpost..! I just gt my first credit card last week.. n wat timing to get a mail on this.. Nice read..!

    Would be nice if the next post wd also b around d same topic.. !

    ‘may b hw to smartly use the credit card’ 🙂

    1. Anuj

      Just use it wisely and responsibly , there cant be a post of that 🙂

  116. bemoneyaware says:

    Very informative article kind of common sense but we know common is common sense. Came across an interesting video(3 min) Credit Card Debt Explained With a Glass of Water explaining the same concept!
    Keep up the good work!
    BTW this article is not showing on your mainpage

    1. Thanks for the link !

  117. Bharath says:

    Hi Manish,

    Thanks for the nice article. But I just wanted to share my bitter experience with one of the banks that happened recently. I have been their so called ‘Privileged Customer’ for the past few years and have been maintaining a good track record.

    Unfortunately, I had forgot to pay my March Bill(Which was due by April 7).
    So, In the April Bill I was charged late payment fee, Service Tax and Interest for my previous outstanding amount(March) and current outstanding amount(April).

    I Called to their customer care umpteen times and requested them to waive off the interest on current outstanding, but didn’t get any proper response for many days. I was even blamed that I didnt respond to their call on a particular day(never got a call at all).Finally,worried about my credit score..went ahead and paid the full due amount. I feel that this credit score is just benefitting banks and not the customers.

    1. Bharath

      Good to put your experience . but I hope you are not expecting them to just remove those charges as you are a long term customers . While you can expect them, but if they dont do it , it does not mean that they are a bad bank for that . Charging a late fee + Interest because of non-payment is what they will surely do as per their business ! .


  118. Aravind says:

    Hi Manish,
    Thanks for the wonderful article. You are doing a tremendous job is making us understand basic financial terms and instruments. Keep up the great work.

    I have a question regarding the topic.
    Say, I purchase a 2-wheeler for 50K. I pay 20K in cash and rest by credit card. I call up the CC helpdesk and get it converted to EMI option. Is it better than going for vehicle loan?. Do post your comments.

    Thanks once again for your articles.

    1. Aravind

      Depends .. you are actually comparing Auto Loan of 30k with EMI conversion for 30K on credit card . You need to pay interest per month on that 30k on credit card ,thats not going to be free .. It will cost a lot more .. but the EMI option on cc can be useful in case

      1. You want to pay off in just 3-5 installments , because auto loan will come with minimum 2 yrs of installments
      2. You dont want to go for long documentation process

      Else , I suggest going to auto loan only

  119. Ajay says:

    I think there is no need to make payment by 30th April if you are making purchases on 20 th April as You mentioned, it will fall within 2 nd billing cycle. Otherwise due date will be 30th May. However, card company will welcome (rather hate ) you to make payment by 30 April, but there is no compulsion.

  120. Rahul Damodar says:

    Dear Manish,

    Nice article once again.

    I want to know about EMI scheme which is available on credit cards.
    What is the limit for the same, if i want to purchase something under EMI scheme above the credit limit?. Will it be possible and feasible?.

    Need your guidance on this.


    1. Rahul

      This should be specific to different banks .. the best answer will be given by bank only , but note that first you need to make a purchase and only after wards once its a proper credid card debt, it will be converted to a regular EMI option (in this case the loan will be converted as personal loan) .


    manish you are doing excellent work of educating ignorant credit card users ,who often gets trapped in card is a dangerous financial tool,if not used with discipline.i have 04 credit cards but i have given standing instructions to the issuing banks to debit total amount due,this way my all credit card dues are paid on due dates.i am using credit cards for the last 09 years & i have not defaulted even once.

    1. Thats a great things .. with 9 years of use , never defaulted is a great thing ..

  122. Salahuddin says:

    Very Nice Article

    1. Thanks Salahuddin

  123. Puneet says:

    Nice article.
    Just imagine if everyone start paying their Credit card bills in full on time, do you think card companies will run out of business?
    Think again 🙂

    1. Puneet

      Definately they will, because the business is based on the fact that given a population , there will always be some small percentage of numbers who will default and will pay high credit card debt .

      1. Puneet says:

        I don’t think so.
        They have a small percent of commission for every transaction. This is something every merchant pays, and not the card holder.
        Take the case of corporate credit cards. These cards are paid off in full every time by the companies. But still credit card company makes huge money on them.

      2. Jason says:

        No Manish,

        Like Puneet says, the commissions are large enough on their own some to keep them afloat.

        The interest & the late charges & the stiff fees are just gravy on top!

  124. Vivek Vishlawath, Hyderabad says:

    Do you know why Banks market Credit cards aggressively and give to all and sundry. It is because its one of the highest revenue generating asset for the bank. The interest rates on Credit cards are as high as 3.4% per month (APR 41%), plus service tax of 12.36% on the interest portion, effectively taking it to 3.8% pm (APR 46%). But did you know, that credit card companies have another income stream. It is INTERCHANGE FEE. For every Credit card transaction done by you, the bank gets fixed 1.1% of the transaction amount as Interchange fee (APR 132.2%). Who actually pays this fee. The merchant installs a POS terminal called EDC Machine at his place. Customers charge bill to their credit cards on the merchants EDC machine. The merchant inturn submits the charges to his bank called “Acquiring Bank” who acquires the charges. The Acquiring banks pays the merchant the transaction amount, less commission called Merchant Service Fee or Discount rate which is in the range of 1.6 to 4%. Typically, it is 2%. The Acquiring bank presents these charges to the Issuer bank through clearing mechanism, and gets the transaction amount, less Interchange fee. All in all, Credit card is an important folio for banks. The Customer should use to card to his advantage. It is not free money and if one misuses it, he will have to pay through his nose. I would suggest one to have a Credit limit of not more than Rs.35,000/- or at best Rs.50,000/-. The maximum cards should be restricted to 2. Remember, Credit card debt is a TOXIC Debt. One is better off using Debit card. Interest free Grace period should not be a crieterion to have a credit card.

    1. thats really some very good information here .. 🙂 .Thanks for this info 🙂

    2. bemoneyaware says:

      That’s not the only way credit card companies make money. Companies make money from every credit card swipe.
      Ex:Mr.Kumar buys a Sony T.V with SBI credit card (a MasterCard affiliated) worth Rs 20,000. The shopkeeper at Sony Showroom swipes the SBI credit card on a machine provided by bank say ICICI bank.

      For using the swiping machine of ICICI bank, merchant will have to pay ICICI bank Merchant Discount Fee.(which is 2% hence at times shopkeeper asks you to pay it) For example if Merchant Discount Fee is 2% then ICICI bank will deduct 2% of Rs 20,000 = 400 Rs and give 19600 Rs to merchant.

      ICICI bank will send the transaction details to SBI bank through MasterCard interchange. SBI Bank will pay the amount to ICICI bank after deducting the Interchange transaction fee. Interchange transaction fee is a fee paid by an acquirer, ICICI bank in our example, to issuer of the credit card, SBI Bank in our example. In our example let Interchange transaction fee be 1%. So SBI bank will deduct 1% of 20,000 = Rs 200 and pay Rs 19800 to ICICI Bank.

      When Mr. Kumar used the credit card to pay, SBI bank earned Rs 200, ICICI bank paid Rs 19600 to merchant and got Rs 19800 so it also earned Rs 200. Merchant had to pay Rs 400. Mr Kumar got the TV he wanted and paid Rs 20,000.

      1. bemoneyaware says:

        Credit card has information on credit cards :What happens when credit card is swiped, Visa/Master Card, Details of credit card ex:what do digits of Credit Card Number signify, Terms associated with card(APR, Grace period etc), History of credit card

      2. Vivek Vishlawath, Hyderabad says:

        I had mentioned the same thing in my comment. You just elaborated it. Anyways, its good to know people are becoming aware of Credit Card usage and its pros and cons.

        One more thing, I would like to add, is that to some extent Credit card usage plays a role in Inflation. Its very less or insignificant in India, because only 3% of the total consumer spends are carried out through Credit cards. But, going forward, I do believe excessive usage of Credit card will keep Inflation, esp. Lifestyle Inflation at elevated levels.

        Also, through Credit card usage, we bringing the merchant in Tax Net. Its good and will definetely increase Direct Tax base.

        1. bemoneyaware says:

          Yes Vivek just elaborated on what you had said by giving an example. The advice is awesome.
          1. Having a max limit on the card – you can call customer care and lower the limit
          2. Max. number of card

          If credit card bill is paid in full then it is free credit for some days and a convenience. Recently a relative of mine was admitted to an hospital. To do surgery hospital demanded Rs 40,000. As he had credit card he paid of.

  125. Sachin Raheja says:

    Hi Manish,

    I guess if you just pay of the minimum balance then the interest is charged on the whole outstanding balance, not the balance after the payment made. I mean, if your total o/s is Rs. 100 while the minimum to pay is Rs. 10 by due date so the interest that will be charged after the payment of this minimum balance will be on Rs. 100 and not on Rs. 90 (100-10)

    1. Sachin

      Is that true with all the banks ? I have read that this is decided by banks if they want to charge it on the full amount or the balance !

      1. Pradeep Borah says:

        Yes, whether you pay minimum balance of Rs 300 or pay Rs 9999, leaving Re 1 as an outstanding balance, the interest would be levied on Rs 10000. So next time you have to pay Rs 301. Please check the reverse of the credit card statement, it is very well mentioned in it. So its better to pay off whole or pay the minimum balance. As part payment is not going to help you.

        1. Thanks for that income pradeep

          While this might be true with all the indian banks , Its not true for all banks in US , there some banks calculate it on the balance outstanding !

          1. Baskar says:

            Hi Manish,

            first of all, great site and continue the good work!!
            Was searching the web for LIC Jeevan Tarang, and go into site, and i am still browsing and learning… for the past 3 hours..
            Let me come to the issue of Credit Card, yes, what Pradeep Borah has told is right. Having done a Credit card system(sotware), i came to know mostly the interest charged is on the whole amount and not the balance-BUT some do follow otherwise .
            Worse, some do even charge the interest on the Total Outstanding amount. Lets say you did 3 transactions of Rs.2000/- each and your total outstanding is Rs.6000/-, and your minimum balance is Rs.3000/- which is paid, the interest for the next month will be calculated on Rs. 6000/-. In the above case you have paid for Transaction 1 in full and Transaction 2 in part, but interest is on ALL 3..

            1. Yea .. So the interest is on the total outstanding in each month , its not looked upon transaction wise !

  126. Amrit Kumar says:

    Yes good informative article for all who are not aware of. I would encourage all to use credit cards as much as possible. After that just follow 2 strict princples: 1. Remember your due date and pay by due date 2. Pay total outstanding. If all follow above then reap great benefits like reward points and improve credit score by maintaining healthy credit history.

    1. Yes .. I would agree to this 🙂

  127. babu says:

    for the first time i am feeling that this article and comments are waste of time…
    sorry manish…

    1. Why do you feel so Babu ? So many people are saying that they learned so much from the article and have got value ? What is the reason others are saying that its a great article ? What do you think so ?

  128. Sushil says:

    Yes Sir…I already know all these tricks of Credit Card Companies
    I have read the Very Same Article somewhere else sometimes year ago.
    Since then i pay my credit card in full …never makes due even a single rupee…

    1. Good to hear that Sushil !

  129. Kiran says:

    Thanks Manish for the info.
    How different is paying the balance with interest vs converting the large bills into EMIs? I get a hyperlink on certain bills “convert to EMI”.


    1. Kiran

      Covert to EMI , is an option of converting your existing outstanding into a personal loan with low interest rates and paying off that with EMI , I thikn its much better option than revolving your credit card debt

  130. Bhanu says:

    luckily, i am paying all my credit card dues on due date to take full advantage of interest free days. in my opinion, credit card is very useful if used wisely and disaster if used carelessly. manish is doing marvellous job to educate people who are new or old in financial world and i really praise his work. this certainly created a robust platform to discuss basis to high end queries.
    cheer up!!!

    1. Thanks for that appreciation Bhanu 🙂

  131. Suhas says:


    Nice article as usual….
    I think while selecting the card you need to select the one which doesnot have any annual maintainance charges and gives good reward points/cash backs and redemption options.
    Regarding payment paying in full amount is always good.
    I make a short term FD(say 1 month or so) of my avg monthly credit card bill amount (around 15K) at the starting of billing cycle and make sure I donot spend more then that in the following month.
    In this way I earn two way interest & also have a check on my budget and expenses through credit card.
    SBI gives 7% int. on FD for 7 days & above…:))
    Nice info keep up the good work.


    1. Vivek Vishlawath, Hyderabad says:

      Now, thats what you call “Financial Discipline”. Keep up the good work.

    2. Thats really cool thing you are doing .. some very cool ideas !

  132. Shekhar says:

    Hi Manish !
    I have also a credit card & still now I using it very carefully.
    Before that I have paased through the same situations & paid huge penalty for two times But now I understand how to use it.
    and now i did a good use of it while I must inform to everybody that suppose If bill generates on 4th of april then only you start to using your CC from 5 th to 20th & pay it (full amount) in one day before due of next appearing bill i.e. bill appear on 5th of May & to be paid on /before 29th of May, And enjoy No interest for 40 to 55days.

    1. Thanks for your inputs , good to hear that now you have become a better credit card user !

      1. Shekhar says:

        keep in touch with lot of informations about finanace……

        Also I have one question about credit card cash withdraw –

        In the past, I had withdrawal Rs. 15000/- from the ATM using HDFC credit card,
        On the same day they have charge me HDFC Cash advance Fee Rs. 375/-, Service tax-service charge Rs. 45/- & EDU cess- Service charge Rs. 1.35/-

        But I dont know in details about how they had charged me, total Rs. 421.35/- just after the withdrawal.
        Can you explain please on above charges are right or anything wrong is their ?

  133. Suresh Sandur says:

    I believe, that it is not just the grace period that you lose, when you make min bal payment. You also lose the credit period. Which means, when ever you swipe the card, that amount is also charged interest from day one. I vaguely remember this from a conversation that I had with card agent.

    That is the reason why the outstanding amount blows up in your face without warning.


    1. Suresh

      From what I understand the calculation of interest is done at the end of the billing period , however there might be banks which do it on daily basis ? Am I wrong to assume that not all banks do it on daily basis ?

      1. Suresh Sandur says:

        you are correct Manish when you say the interest is calculated at the end of the month. What I meant was, say, your statement for April says you have to pay Rs 1000 by April 25 but min balance is 250. You pay 250 so outstanding bal is now 750. Now you make a purchase of another 1000 on April 26. The interest, in your May statement, will be calculated on 1750 at the end of billing cycle not just on the 750 outstanding from the prev bill. effectively you are losing the 55 days credit period on your purchases after failing to pay the complete bill amount.

        However not sure if all the banks have the same policy.

  134. sandeep says:

    Thanks Manish for this informative article.

  135. Rajaram says:

    Manish, you are coming up with some very practical and highly useful articles for the middle class. This one, and the previous one on PPF are marvellous.

    If possible, credit card should only be used for convenience, as a cash card and as something where you can buy something and then pay 55 days later. CC should not be used for its real purpose, which is to buy things on long term credit (all CC companies will be after our blood after seeing this, since their main purpose of income comes from this). One should not even depend on CCs for emergencies, better prepare for emergencies now, then be caught with pants down and having to resort to CC to deal with the emergency.

    Easier said than done, with all the advertising and marketing going on that lures us to buy things we do not need, in order to gain admiration of people who do not care, in order to get satisfaction that will not last. This takes a sense of detachment, and a strong will power to focus on what one’s life is, rather than what one’s life isn’t relative to others. I fight this everyday, most of my mental & emotional energy is sucked up by what I do not have relative to others, and what I cannot do for my loved ones relative to what others are doing for their loved ones. Letting go is hard work!

    So, it comes down to knowing oneself, warts and all, accepting that. CCs, if not used smartly for one’s own interest, can put income in the accounts of the banks, at the expense of one’s life and freedom.

    1. Yes I agree with you .. CC should be the last thing in mind , when there is no choice and there is no one to help ! , thats how credit card should be looked at, I use credit card as my debit card which will take money from my bank account at the end of the month , so if I have 40k in my account, no way I will spend mroe than 40k . I think once a person make sure if he a responsible person in his financial life , this comes automatically ! 🙂

  136. Vareen Ray says:

    Though I am a frequent user of credit cards, still I have never defaulted on my payments and have always paid back my credit card bills in full. I have two credit cards with their billing dates 15 days apart (15th and 30th). With my credit cards I have evolved an interesting spending pattern that helps me earn maximum on my savings deposit.

    So taking an example:
    Cycle for first credit card: March 15 to April 14, Billing date April 15, Due date May 10
    Cycle for second credit card: March 30 to April 29, Billing Date April 30, Due date May 25

    So what I do is that from period March 15-March 29, I use my first credit card and from period March 30-April 14, I use my second credit card.

    In this way in both cases I enjoy a minimum of 40/41 days grace and maximum of 55 days depending when I spend.

    I do this cautiously and thus I always earn more on my savings interest.

    1. Vareen

      Thats a really great way of managing your credit card and get maximum out of it 🙂 .. very nice 🙂 .

  137. RK says:

    Super Article!

    1. Thanks for appreciation !

  138. Kiran says:

    I think these information is very much useful for those who are planning to go for credit card and don’t have much information… I am using credit card from last one year and I am makind payment right time also… but all should have very much clear about what amt to be spent every monthly by CC… By the same way you have the tools to loot the bank … I think this CC is the only think by which we can use bank’s money without any interest but if you haev descpline approach…. I learnt it from my GURU,,, Mr Amarjeetsinh Khalsa

    1. Yea .. if you use cc properly , that would be a great thing , else it will be disaster

  139. kiran says:

    Hi Manish,
    Excellent article. Thank you for showing the hidden pitfalls in a credit card.
    Hey I had a rather ‘silly’ question. When I saw the interest rate that the credit card agency charges when we borrow money from them, i was wondering will they give the same interest when we pay excess amount? This is something like where the credit card agency owes me money rather than the reverse way! For example, lets say i owe Rs.4900 on my card, but i ended up paying Rs.5000…that is, i paid Rs.100 more. Now lets say i dont make any more purchases on that card, now would the credit card agency give me interest on this excess Rs.100? 🙂 🙂 🙂

    1. Kiran

      Definately not .. Why do you make extra payment , your extra payment will be adjusted in next payment cycle

  140. Lucky to worked in credit card industry in early stage of career, known all these facts from very long time.. 🙂

    Kudos to author for explaining in so simple way…

    1. Good to hear that you were in that same industry ..

  141. Imon says:

    Informative as usual.. 🙂 . I would like to share one trick that I use to make my life simpler..

    I try to make sure that the CC that I take has the billing date after 20th of each month. In that case the payment due date falls in the first week of the next month. In case if I have to make any big ticket purchase, I do it between the 20th and the 30th of the month. This helps me, as I get two month ends (which means 2 salaries 🙂 ) before next payment date arrives..


    1. Great tip ! . I have covered this already in this same article if you see carefully

  142. Hi Manish,
    Good article. But I felt this was a little technical from layman’s point of view. This is my personal opinion, donno what others will feel.

    I also wanted to mention the same thing that Amol has mentioned. In stage 3 of the 1st diagram it should be 30th May.

    For me credit card is just a convenience to take the benefit of the free credit period. I use my credit card only when I know there is sufficient balance in my bank account to pay the entire amount at the end of the billing cycle. I use the credit card at all possible places and then make one single payment from internet banking to clear the dues.

    1. Gopal

      Not sure if its too technical for most of the people , Majority said they got idea about it and it was explained properly .. anyways .. I am aware of the issue the image has, will change it

  143. SURESAN RAJA says:

    A good eye opener message to all the credit card users. Unfortunately, I am also a victim of credit card trap. I was using 4 credit cards and paying only the minimum payment. Around 2 years back as I am unable to make any of the payment, I given a letter to each back mentioning my inability to pay. They told they will not send any recovery people for 1 year. The liabilities has climbed upto the lacs of rupees from below 20000 outstanding. But I have clossed 2 credit cards by settlement only for the principal amount of Rs.16000/- each. After reading your earlier blog I came to know that the CIBIL will show as “SETTLED”.
    I do not know how to closs other cards too. Is there any option from you to make any debt clearing products (consoldiation of loan/credit cards liabilities). Please give some suggestions/blog about this. Thanks and God Bless You for your worth advise to several lacs of people.

    1. Jason says:


      Try calling a credit counselling agency like DISHA.

      They should be able to guide you in such matters.

      Site is here…

      1. SURESAN RAJA says:

        Thanks for the information.

      2. How much do they charge for counselling ?

        1. Jason says:

          I was under the assumption, that they did this on a pro bono basis.

          Suresan, if you do call them, will you let us know?

    2. Vivek Vishlawath, Hyderabad says:

      Its like America here. Many people are not aware that banks are writing off sizeable amount of credit card debt for people with debt problems. In many cases, the average write-off is 30-40%. If anyone is seriously in debt problem, one can negotiate with the bank for settlement, where substantial amount will waived and the balance is payable in 3 installments. But beware, it impact your credit report adversely. If you dont mind that, i would suggest settlement. And don’t bother very much, because Credit card is an unsecured debt. Not even a fraction of the legal case reach the court. The banks has to do an settlement. In any case, if you are not sure of making the payment, never give Cheque which will eventually bounce. Because it invites legal implications. The bank may use this as an leverage.

      1. SURESAN RAJA says:

        Thanks for your comments.

    3. Suresan

      In case you are not able to clear off your loan, it will take 7 yrs to get it blank , the remarks stays for atleast 7 yrs in credit report .

  144. Amol says:

    Dear Manish,

    Good article and important one. Earlier I had gone through this and then learned a lesson :-). Same about the EMI schemes offered by Banks. we really need to calculate everything before we swipe.

    In your first Diagram about Billing cycle, for the third purchase i.e on 20th April you showed that it has to be paid by 30th April instead of 30th may.

    Thanks & Regards,

    1. Amol

      That change is complete now .. I have corrected it

  145. anil dcunha says:

    very informative article. i have also fallen into their trap but then i read all articles on credit cards appearing online and woken up to the fact of how these credit cards work. But this article is superb with good illustrations.

    i have a query? does cancellation of your credit card have any affect on credit score? i have around 4 cards and want to cancel 3 and keep only one. kindly advice

    1. Naveent says:

      Cancelling your credit card will not make any difference on your credit score. But its better to make sure to mention to the credit card company to specify the reason as “cancelled on customer request”.

      Someone please let me know if there is more to it.

      1. Sachin Raheja says:


        i would suggest you not cancelling your cards if you use them often. one parameter by which your score gets affected is that how ‘credit hungry’ you are. this simply means that how much credit do you use which is freely available to you specifically from unsecured loans such as credit cards.

        if your usage is high then you can divide it between these cards so that you don’t cross more than 70-80 % of the credit limit on any card..if you use your cards less often…which is a very good thing then, i would suggest to still keep at least two cards alive just to have an either-or option in a contigency.

        1. Naveen says:

          Hi Sachin,

          Even I read about not using all credit limit in one credit card. But as all credit cards are mapped with your PAN number, won’t the credit agencies be able to track your credit hungriness even with many cards?
          Please clarify on this..

          1. Naveen

            The thing is its always relative to your total credit usage compared to your limit . So you can have 4 cards with total limit of 1 lacs, but you might be using only 50k combining all ..

      1. prakash says:

        i,m hdfc credit card withdraw 7000 rupees 18 april for 20 days 300 rupees fees cash withdraw & 45 rupees other service charge. 3.5% interest daily ya monthly charge i,m total amount which given in bank. plz calculate plz rply immidate

        1. Hi prakash

          This is very specific query which you should follow up with the concerned authority only. We wont be able to comment on that


  146. Jig says:

    Its clear my view now.
    Just till yesterday i was thinking about the the method and i even asked to bankers also. As i did purchase a big ticket on last 25th and wheather i will get 55 days credit or not. but your this blog clear my view and will take care in future while doing purchase of big ticket.


    1. Good to know that you got your answer from this 🙂

  147. Prasoon says:

    Thank Manish for sharing this information. I am following your articles since a year and a half. After reading each article, only one question comes to my mind – ‘Tum mujhe kyun nahin mile pehle’ :-D.

    I am a victim/guilty of minimum payment, and in a sort of debt trap as well. However my score is above 800 due to timely payments. I really want to get out from this trap, but don’t know how.

    Do you think a financial planning will help me? Can the planning be specific to debt trap? Or is it generally for investment and insurance, which I don’t want at this stage?

    1. Prasoon

      Financial Planning per-se will not help you , because its focus is not on Debt Clearning .. However we do strong conversations on debt clearance in our Financial Coaching program . If you think it can be useful to you , you can schedule a call with us :

  148. Bhushan says:

    Very informative article

  149. Kapil says:

    A very nice article indeed!! I was amazed to see that there are many people who are yet to understand the above, including, my office mates.

    1. Deepak says:

      I agreed!

    2. Thansk for your comment Kapil , there are tons of investors who have no idea about these things !

      1. ABHISHEK says:

        Dear Manish sir,
        sir what dacumentation required to purchase credit card on the basis of salery account..and what will be minimum salery reqquired for purchasing credit card for HDFC bank……..i am new comers in this field…please convey me on my mail id if possible from ur side
        eagerly waiting for ur valuable reply


        1. If you already have a salary account with the bank u are asking credit card from , then mostly there is no documentation , because your KYC is already done by the bank . if its new, then identity proof, address proof etc will be required.

          Regarding “salary” , It will depend on the bank to tell that .

        2. Matt says:

          Rule No: 1 -Monthly salary should be ‘take home’ without Incentives and Bonus.
          Rule No: 2- You should have at-least 2 months of regular salary credited in the required limit.

          HDFC : Salary Account Holder of min salary Rs.13000/month
          HDFC : Non HDFC Bank Holder Rs.15000/- month

          CITY: Salary Account Holder of min salary Rs.20000/-
          CITY: Non CITY Rs.25000/month and the company should be listed. You can check whether your company is listed in bankbazaar website.

          ICICI: Salary Account Holder Rs.20000/-
          ICICI: Non Salary Account Rs.25000/month

          AXIS: Salary Account Holder Rs.15000/-
          AXIS : Non Salary Account Holder Rs.25000/-

          SBI: Salary 25 K+

          Std Chartered: 28+

          These are the criteria for getting a credit card

          1. Above mentioned monthly take home salary.
          2. Listed company in the stock exchange ( must have for CITY & standard chartered)
          3. CIBIL score not less than 700
          4. No check bounce history in past 3 months
          5. If your office land phone is given, telephone verification should be successful.
          6. Address verification should be successful
          7. There should not be any major mismath in your signatures in the documents while you sign them
          8. Documents ( scanned copy is sent to verification dept ) should be properly visible and readable while reviewing.

          P.S : Never try to apply for a credit card with CITY and Standard Chartered unless your company is listed . I am working in credit card support division for HDFC and previously CITY’s.

          Hope this helped. Enjoy your advantage and spend sensibly !! Take Care all

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