Credit cards — the most expensive bank product
In this chapter: How interest accrues, the grace period, and the minimum-due trap · Late fees, FX markup, EMI-conversion charges, and skipped fees · Reward economics — when they actually reward you · The two rules for using a credit card without going broke
A credit card is two products in one: a payment instrument with a 20-50 day interest-free period, and an unsecured loan at 30-42% APR. As long as you pay the FULL outstanding by the due date, you use only the first. Pay the "minimum due" or any amount less than the total, and you fall into the second — and the interest is calculated retrospectively from the transaction date, not from the due date.
The minimum-due trap: if your bill is ₹50,000 and you pay ₹2,500 (the typical 5% minimum), the remaining ₹47,500 starts accruing 3-3.5% PER MONTH from the original purchase dates. Fresh purchases lose their grace period entirely until the previous bill is fully cleared — every new spend immediately accrues interest. The result: a one-time ₹50,000 emergency, paid with minimums for a year, can cost you ₹15,000 in pure interest. The card statement will describe this in fine print; the issuer hopes you never read it.
Two non-negotiable rules: (1) Pay full statement balance every month, period. (2) If a month's balance is too large, immediately convert it to an EMI on the card itself (12-18% APR for 6-12 months) — this stops the daily interest accrual at much lower cost than letting it revolve. Bonus rule: foreign-currency transactions carry a 3-3.5% FX markup separate from currency conversion — for international purchases, a forex card or a no-markup card (a few exist) can save real money.