How this is worked out
Indian card issuers quote interest per month. A card advertising 3.5% a month is not a 42% card by addition — it is one by compounding, and the compounding is what the monthly quote obscures:
(1.035)¹² − 1 = 51.1% effective
The APR on your statement will normally be the 42% simple annualisation (3.5 × 12). The effective rate you actually pay if a balance revolves all year is higher still, because each month's interest joins the balance the next month's interest is charged on.
The minimum payment in India is conventionally a flat percentage of the balance — commonly 5% — rather than the "1% plus interest" rule used in the US, UK and Canada. That changes the shape of the trap. A flat 5% of the balance at a 3.5% monthly rate leaves only about 1.5% of the balance going to principal each month, so the balance decays slowly and the term runs to years.
The comparison that matters is the one this page puts side by side: what the minimum does, against what a fixed amount you choose does. Nothing else on this page will change your mind as effectively as those two numbers together.
One more thing every Indian cardholder should know: paying the minimum does not preserve your interest-free period. Once you carry any balance forward, new purchases typically start accruing interest from the transaction date rather than from the next statement — so the grace period on this month's spending is gone too.
A worked example
- Balance
- ₹50,000
- Rate
- 3.5% a month — 42% a year
- Minimum payment
- 5% of the balance, floor ₹200
- First minimum payment
- ₹2,500
- Cleared on the minimum
- 16 years 11 months
- Interest paid on the minimum
- ₹1,10,333
- Total repaid on the minimum
- ₹1,60,333
- Paying a fixed ₹2,500 instead
- 2 years 11 months, ₹37,494 of interest
- Saved by fixing the payment
- ₹72,839 and 14 years
- Paying a fixed ₹5,000 instead
- 1 year 1 month, ₹12,633 of interest
The same ₹2,500, fourteen years apart
The first minimum payment on a ₹50,000 balance at 5% is ₹2,500. Pay exactly that every month as a fixed amount and the card clears in 2 years 11 months, having cost ₹37,494 in interest. Pay the minimum — which is 5% of whatever the balance happens to be — and it takes 16 years 11 months and ₹1,10,333.
Nothing changed except that the payment shrank as the balance did. The second month's minimum is ₹2,462.50, the third ₹2,425.56, and the reduction compounds in exactly the same way the interest does, in the issuer's favour. Fourteen extra years and ₹72,839 of extra interest come from that one difference.
This is why the single most useful thing anyone with card debt can do is fix the payment. Not increase it — fix it. Set a standing instruction for the amount of today's minimum and never reduce it, and most of the trap disappears without finding a single extra rupee.
Why an Indian card costs 42% and a British one costs 24%
Indian card pricing is quoted monthly because the numbers are large. "3.5% per month" reads as a small figure; 42% a year does not, and 51.1% — what it actually compounds to over twelve months — reads as what it is. The monthly quote is not dishonest, but it is doing work.
That rate is roughly double the 20–25% typical of the US, UK, Canadian and Australian cards elsewhere on this site, which means every conclusion those pages draw about card debt is understated here. Interest at 42% on a revolving balance overtakes a 5% minimum payment far more aggressively than interest at 24% overtakes a 1%-plus-interest minimum.
It also changes what counts as a good alternative. At 42%, converting a balance to an EMI at 14–18%, or taking a personal loan at 12–14% to clear the card outright, is frequently a large saving rather than a marginal one — provided the card is then not used to rebuild the balance, which is the failure mode that makes consolidation worse than useless.
The interest-free period, and what a single revolving month costs
A card gives you an interest-free period of up to around fifty days on purchases — but only if you pay the statement in full. Carry any balance forward and most issuers begin charging interest on new purchases from the transaction date, with no grace period at all, until the balance is cleared in full again.
So the cost of revolving once is not one month of interest on the amount you did not pay. It is that, plus interest from day one on everything you spend afterwards, until you clear the whole thing. People who pay "most of it" each month are often surprised at how little the balance moves.
Cash withdrawals on a card never have an interest-free period. Interest runs from the day of withdrawal and a separate cash-advance fee applies, typically a percentage of the amount with a minimum. A cash withdrawal on a 42% card is among the most expensive ordinary borrowing available to a retail customer in India.
Avalanche or snowball, with more than one card
List several debts and this page computes both orders. Avalanche pays the highest rate first and always costs less interest. Snowball pays the smallest balance first and clears individual cards sooner, which is the only reason anyone sticks with it.
At Indian card rates the avalanche advantage is larger than it is in the other markets, because the rate spread between a 42% card and a 12% loan is so wide. Paying ₹1,000 extra against the card rather than the loan is worth three times as much.
The honest caveat is that the cheaper plan is worthless if you abandon it. If clearing one small card in four months is what keeps you going, snowball is the better plan for you, and the page shows exactly what that choice costs so it is a decision rather than an accident.
Assumptions and sources
- Monthly to annual rate
- 3.5% a month annualises to 42% simple and compounds to 51.1% effective — (1.035)¹² − 1. Computed by this page, not quoted.
- Minimum payment convention
- A flat percentage of the balance, commonly 5%, rather than the 1%-plus-interest rule used in the US, UK and Canada. Your statement states the rule for your card. checked 2026-09
- Payoff schedules
- Both schedules are computed month by month in assets/js/tools/finance.js and verified in tools/test/finance.mjs against an independent implementation.
- Interest-free period and cash advances
- Stated as the general convention across Indian issuers — interest from the transaction date once a balance revolves, and no interest-free period on cash withdrawals. The most-important-terms document for your card governs. checked 2026-09
- Not modelled
- Late-payment fees, over-limit fees, GST on fees and interest, reward-point forfeiture, and issuer-specific EMI-conversion offers. All of them make the minimum-payment path worse than shown, never better.