Do you often rely on your credit card? Maybe it’s just for small expenses or emergencies. But have you noticed how fast your balance grows? 

Let’s break it down. 

Imagine you have ₹50,000 on your card. If your bank charges 36% interest per year, and you’re only paying the minimum, that debt doesn’t just stay, it grows. 

TransUnion CIBIL reported that credit card defaults in India went up to 1.8% in June 2024 from 1.7% just six months before and 1.6% in March 2023. It’s easy to see why so many people struggle.

Switching to personal loans can be an option to handle this debt better. Let’s explore the hidden costs of credit card interest and practical ways to tackle it.

Why Personal Loans Help Control Credit Card Debt

Credit card interest is different from personal loans. Here’s why it matters: credit cards compound interest daily. So, if you carry forward a ₹50,000 balance, each month’s interest keeps adding to your debt. Let’s see this in action:

See the pattern? Even a small monthly interest piles up fast.

Minimum Payments – A Costly Mistake

Only paying the minimum? It may seem manageable, but it mostly covers the interest. If your minimum payment on a ₹50,000 balance is ₹1,500, nearly all of it goes toward interest. Your debt barely reduces. 

Over one year, you could end up paying ₹18,000 in interest alone without touching the main balance.

A personal loan with lower interest can clear this debt faster, as it doesn’t have the same daily compounding interest that credit cards do.

Extra Credit Card Fees You Don’t Notice

Credit cards come with extra fees—late fees, cash advance fees, and foreign transaction fees. These charges sneak up on you, and with interest, they grow even more. Here’s a quick look at some common fees:

• Late Payment: ₹500 to ₹1,000 per missed payment.
• Annual Fee: ₹500 to ₹1,200 per year.
• Cash Advance: 2.5% of the amount withdrawn.
• Overlimit Fee: Around ₹500–₹1,000.
• Foreign Transaction Fee: Up to 3.5% per transaction.

Each of these adds to your balance, which only means more interest to pay.

Introductory APR Offers: Too Good to Be True?

Some credit cards start with a low or zero-interest APR for the first few months. But after that, the rate can jump. 

Let’s say you use a card with a 0% APR for six months, but then it rises to 30%. If you don’t clear the balance, that debt will now accrue at 30%. These offers can lure people in, but most end up paying much more.

A personal loan can avoid this hassle with fixed rates, offering peace of mind.

Practical Tips to Cut Down Interest

Here’s how you can manage credit card interest better:

• Balance Transfer: Shift to a card with a lower rate (watch for transfer fees).
• Set Up Autopay: Avoid late fees by automating payments.
• Limit Cash Withdrawals: Cash advances start charging interest immediately.

Following these steps can save a lot on interest costs.

Conclusion: Should You Consider Personal Loans?

Credit cards can be convenient, but they come with hidden traps that can drain your finances. Personal loans could help in managing credit card debt better and lowering the interest burden. 

So, are you keeping an eye on your credit card interest? Or are you unknowingly paying extra?

FAQs

What are personal loans? 

Personal loans are funds you borrow from banks with fixed interest rates and EMI options.

How does credit card interest work? 

It compounds daily, meaning your interest increases on top of each day’s balance.

Can personal loans help with credit card debt? 

Yes, personal loans can offer lower rates, reducing overall interest costs.

What’s better for long-term debt—personal loans or credit cards? 

Personal loans are often better due to lower interest and fixed EMIs.