Does Minimum Payment Affect Your Credit Score?

Paying minimum dues may not have a direct and immediate impact on your CIBIL score. However, consistently paying the minimum dues and carrying forward the balance can hurt your credit profile as it increases your debt and credit utilisation. Understanding the long-term impact of paying the minimum dues can help credit card users to maintain healthy card habits.

What is ‘Minimum Amount Due’ on a Credit Card?

Every credit card statement includes two important figures: the total payable amount and the minimum payable amount. If you cannot pay the total amount due before the payment due date, your credit card issuer requires you to pay the ‘minimum amount due’.

For example, your credit card statement shows:

• Total amount due: ₹40,000
• Minimum amount due: ₹2,000 (a specific percentage of your total amount due; may vary from issuer to issuer)
• Payment due date: 5th September, 2026

You can meet the minimum payment requirement when you pay ₹2,000 by 5th September. However, pending dues of ₹38,000 are not waived. It is carried forward as per the card's terms and attracts interest.

Does Paying Only the Minimum Due Reduce Your CIBIL Score?

Paying only the minimum due on time on a credit card helps you avoid direct penalties for non-payment and also saves you from getting a defaulter status. It does not immediately bring down your CIBIL score. However, it can have an adverse impact on your CIBIL score in the long-term.

Here are the long-term impacts of consistently paying minimum dues on your CIBIL score:

Increased Risk of Debt Trap:

A growing outstanding balance is one of the major concerns in regularly paying only minimum dues. When a card is used continuously without clearing the balance, outstanding debt can increase significantly, along with high interest charged on the unpaid amount.

Higher Credit Utilisation Ratio:

Continuing to use the card without clearing the outstanding dues can increase the credit utilisation ratio. Credit utilisation refers to how much of your available revolving credit you are using.

For example, if your credit card limit is ₹1 lakh and your outstanding balance is ₹40,000:

Credit utilisation ratio = ₹40,000 ÷ ₹1,00,000 × 100 = 40%

A high utilisation ratio can signal that you are relying heavily on available credit. CIBIL considers a high credit utilisation ratio as one of the key factors in its scoring methodology. Hence, paying the minimum dues may offer a temporary solution to avoid penalties and defaulter status. It can have a negative impact on your credit score over the long-term.

CIBIL's scoring methodology considers credit utilisation, payment behaviour, and other aspects of your credit history. Hence, late payments and delinquencies can adversely affect your credit score.

The Reserve Bank of India has clearly instructed credit card issuers to communicate the implications of only paying the minimum dues because repayment can extend over months or years with consequential high interest costs.

What Happens If You Don’t Even Pay the Minimum Amount Due on a Credit Card?

The consequences of missing the minimum due payment altogether can be more serious. Suppose you need to make a minimum payment of ₹2,000 as per your card statement and you pay nothing by the due date. The account can become past due, and late payment penalties and interest may apply according to the card issuer's terms.

If the account remains past due beyond the applicable reporting period, the lender can report it to credit information companies. RBI rules specify that credit card accounts are reported as "past due" only when they remain past due for more than three days. A history of late payments or delinquencies can negatively affect your CIBIL Score.

Tips to Protect Your CIBIL Score While Using Credit Cards

Pay the total amount due whenever possible to prevent revolving credit card debt from accumulating.

1. Don’t ever miss the minimum due payment to avoid a ‘default status’ tag and penalties.
2. Keep credit utilisation under control and try to start each next cycle with a clean slate.
3. A higher credit limit does not mean you should spend more. Don’t use your card unnecessarily.
4. Review your CIBIL report and payment history regularly for inaccuracies. Along with good repayment behaviour, CIBIL recommends regular monitoring of your credit report.
5. Avoid using one credit card to pay another debt, which can increase your financial burden.

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Conclusion

Paying the minimum amount due before the payment due date does not immediately lower your CIBIL Score. However, it should not become your regular repayment strategy. The remaining balance continues to be payable and can attract interest. This can result in high credit utilisation and mounting debt, which adversely affects your financial health and credit profile.

Paying the total amount due by the due date whenever possible is the best strategy to protect your CIBIL score. If you are temporarily unable to do so, paying at least the minimum due on time is preferable to missing the payment altogether. A healthy CIBIL profile is a reflection of responsible borrowing, controlled credit utilisation, and consistent credit behaviour.