Many banks now offer flexibility in credit card billing cycles, allowing cardholders to adjust payment dates according to their salary cycles and repayment comfort. As reported by TaxHelpdesk, the change usually becomes effective from the next billing cycle, with most banks allowing another billing cycle change only after 180 days. This flexibility can significantly improve cash flow management and help users align their credit card payments with their income patterns.
Credit cards offer an interest-free period only when the full outstanding amount is cleared by the due date. According to reports from Mint, even a small unpaid balance converts the account into revolving credit, with interest applying not only on the unpaid amount but also on new purchases from the transaction date. As noted by Adhil Shetty, CEO of BankBazaar, when this requirement is violated, interest may be charged retrospectively on the full outstanding amount from the transaction date, and not just on the unpaid portion.
A practical example demonstrates the significant cost impact of unpaid balances. As reported by Mint, if a cardholder had an outstanding bill of ₹10,100 but paid only ₹10,000 by the due date, the remaining unpaid amount could lead to the loss of the interest-free grace period. Assuming a 30% annual interest rate (around 2.5% per month), interest on the full ₹10,100 outstanding would amount to about ₹252.5 for the month. If the user made fresh transactions worth ₹20,000 during the next billing cycle, those new spends may also begin attracting immediate interest, adding another ₹500 in charges.
The compounding effect of unpaid balances can create substantial additional costs for cardholders. According to Mint reports, with an additional 18% GST on the interest component amounting to roughly ₹135.45, the total payable amount could rise to nearly ₹20,988 by the next due date. This represents approximately ₹1,000 extra that could have been avoided if all dues were cleared within the stipulated deadline, with interest calculated on a daily reducing balance basis.
Paying only the minimum amount due can create a false sense of financial security, as reported by Mint. Santosh Agarwal, CEO of Paisabazaar, explains that while minimum payments avoid late payment charges, the remaining unpaid balance starts attracting finance charges that can go up to 42% per annum for most credit cards. This can quickly create a debt spiral, with all new purchases becoming ineligible for the interest-free period and incurring finance charges from the first day.
