When Ashutosh Singh got his first credit card in 2023, he knew one thing: pay the bill on time and build your credit score. Singh, now 26, was working and planning to take an education loan for his MBA. He accepted a lifetime-free card offered over a telecall because it promised cashback and could help build his credit history.
When his first bill arrived, Singh opened the payments app he used for all his bills. The payment page had the minimum amount due pre-selected, without explaining what it meant. Singh assumed the bank was offering him the option to pay a smaller amount without penalty and settle the rest later.
The problem, however, may extend beyond customers consciously choosing the minimum amount. Some credit card users who rely on autopay say they have found their payment settings switched to the minimum due without their knowledge.
When autopay goes wrong
In Bengaluru, Raghuvendra, an IT consultant, said he had always used autopay for his credit card bills until he discovered that the setting had been changed to minimum due on the backend. He noticed only after finance charges started appearing on his card statement.
“I contacted my relationship manager (RM) and the charges were eventually reversed, but only after multiple follow-ups going on over a month,” he said. He did not wish to reveal the bank, as his issue had been resolved.
He faced another problem with a scheduled payment on a different card from another leading private bank. He used to schedule payments through web netbanking a few days before the due date and then check whether they had gone through. On one occasion, the scheduled transaction disappeared from the system. He followed up with the bank for about a month and says the issue is still being investigated.
“I have just stopped relying on autopay or standing instructions as I do not trust the system to execute them correctly. I just pay my credit-card bills manually now.”
Raghuvendra’s experience is not an isolated one. Another person told Mint of a similar experience involving his wife. During an annual review of her financial statements, he noticed recurring finance charges that started at around ₹12,000 and later rose to ₹20,000- ₹25,000 a month. The Bengaluru-based finance professional, who did not wish to be identified, estimates that about ₹1.2 lakh was charged in total.
“I found it strange as she didn’t have any loan. I traced them back to her HDFC credit card to realise that her credit-card autopay had changed to paying only the minimum amount due a few months back,” he recalled.
After several months of following up with his RM, the bank refunded a substantial portion of the charges but did not clarify who or what had changed the setting. The practice of the total amount due changing to MAD over time has also been documented across other banks, said Raj Khosla, founder and MD of MyMoneyMantra.
These cases raise an important question about how autopay options are designed and whether they can push customers towards minimum payments and, in turn, generate finance charges. A customer who has opted to pay the full bill may not check the setting every month, making any change to the minimum due easy to miss.
Khosla said common reasons include UI glitches, preset autopay settings, system errors in processing the total statement balance and issuers setting MAD as the default. “If the toggle moves to minimum due over time despite choosing the outstanding amount, it can be seen as a mandate-management or system-design issue rather than a simple UI mistake,” he said.
Responding to Mint's queries, HDFC Bank said it does not unilaterally change instructions given by customers on autopay. The instruction can be changed by the customer from ‘minimum amount due’ to ‘total amount due’, or vice versa, as per their choice, by logging into the bank's channels.
The autopay problem highlights a broader issue with how credit-card payments are presented to consumers–the minimum amount due can appear to be a routine payment option, even though choosing it can have significant financial consequences.
Pitfalls
The minimum amount due, typically 5-10% of the total outstanding, is meant to prevent a credit card payment from being treated as a default when a customer cannot pay the full bill. Paying it on time generally means there is no late-payment fee, and the account is not reported as a missed payment, so the credit score does not take an immediate hit. This can make the risks of paying only the minimum less obvious.
Pawan Kumar, a 30-year-old software engineer in Gurgaon, is a case in point. As a new credit card user, he paid only the minimum through his bank’s netbanking interface for around six months and did not realise anything was wrong as his credit score remained around 780. A colleague eventually explained what minimum due meant. By then, the interest he had paid exceeded the amount he had originally spent on the card, although his overall loss was limited because his credit-card spending was relatively low.
“I learned that my score did not fall, as banks don’t report you to credit agencies on paying a minimum amount. However, in hindsight, it was misleading as I was under the impression that paying the minimum must be acceptable if it’s not impacting the credit score,” he said. He subsequently stopped using credit cards because the experience made him question what other charges or design choices he might be missing.
Bhavesh Jain, MD and CEO of TransUnion CIBIL, said paying the minimum on time generally means the account is not treated as a missed payment for that billing cycle, but the unpaid balance remains on the credit-card account. “If a customer carries a high balance for several months, credit utilisation can remain elevated and affect the CIBIL Score over time,” he said.
The bigger cost of paying the minimum is the loss of the interest-free period. If the full bill is not paid, interest is charged on unpaid balance as well as all subsequent purchases at annualised rates of 20%-32%. Ritesh Srivastava, founder and CEO of Freed said the interest on unpaid amount is applied retrospectively. For example, if a customer pays ₹10,000 of a ₹1 lakh bill, the remaining ₹90,000 will incur interest from the date payments were done. Every fresh transaction will also lose the 45-day interest-free window.
The Reserve Bank of India (RBI) mandates banks and card issuers to explain these implications in credit-card statements. Statements must carry a warning that “paying only the minimum can result in the repayment stretching over months or years, with interest charged on the outstanding balance.”
Misplaced disclosures
While banks make RBI mandated disclosures in credit-card statements, the mandate is falling short as more customers view and pay their bills through mobile banking apps and payment platforms rather than reading PDF statements.
Mint reviewed the mobile netbanking interfaces of several large banks and found that all show the minimum due alongside the total amount due or allow customers to enter a custom amount. However, most do not clearly explain on the payment screen that choosing the minimum due will result in interest charges. Netbanking apps also show billed and unbilled credit-card transactions, making it less necessary for customers to refer to their PDF statements.
Most of the widely used payment apps that allow credit card bill payments, including CRED, Paytm, Freecharge, PayZapp and Amazon Pay, follow a similar approach. CheQ was the only exception in Mint’s review, explicitly stating that paying the minimum due would attract interest on the outstanding balance.
Srivastava said the information needs to be shown where customers make the payment. “The warning is in a statement PDF sent on the customer's email, while the payment happens in an app. Two different places and the customer is only ever in one of them. The banks or payment apps should just show the cost where the payment button is,” he said.
The concern is greater when the minimum due is pre-filled on the payment screen, he added, as customers may simply confirm the amount already selected.
The minimum due can help customers avoid a missed payment when they cannot pay the full bill. But it should be the last resort. Compounding interest that continues to accrue until the outstanding amount is cleared in full can balloon over time, spiralling into a debt trap.