The Emerging “Debt Trap” of Credit Cards.

The problem of getting stuck in debt through credit cards is becoming more serious for many Indians these days. More people, especially younger professionals, are failing to pay their credit card bills on time, showing a bigger financial worry. For instance, the amount of credit card debt that is overdue by 91 to 360 days went up by 44% in a year, reaching Rs 33,886 crore by March 2025, while the total money owed on credit cards hit Rs 2.9 lakh crore by May 2025. On the surface, credit cards seem like a fast way to get money or improve your lifestyle, but there’s a hidden cost—every time you swipe the card, interest keeps adding up, and your balance grows if you only pay the minimum amount each month.

Looking at the bigger picture, household debt has gone up from 38.5% to almost 43% of the country’s GDP between 2021 and 2024, mostly because of borrowing without security, like credit cards.
In this situation, the RBI is being more careful. Even though they are trying to help the economy grow, people are tired of investing, and more missed payments, especially in credit card debts, have led banks to be stricter with lending. This is causing a credit crunch and making it harder for people already struggling to repay their debts.

Many people think they are handling their credit card bills until one month they realize they’re paying more in interest than the actual cost of what they bought.
For example, if you buy a Rs 50,000 gadget in installments using your credit card and miss a payment, you could end up paying Rs 65,000 to Rs 70,000 or even more because of high interest rates, which can be between 30% and 45% per year. This is where the trap starts—when the interest builds up faster than you can keep up with your payments.

Why So Many People Fall Into This Trap

The issue with credit cards isn’t just one big mistake—it’s the result of many small choices you make every day. You might use your card for a purchase you think is a good deal, or pay only the minimum amount due to avoid making a bigger payment. Over time, this leads to a cycle where most of your monthly payments end up covering the interest, not the actual amount you owe.

Research in India shows that almost 40% of credit card users have unpaid balances each month.
Many people don’t realize that paying just the minimum can take years to clear the debt. For example, if you have a balance of Rs 1,00,000 and you only pay Rs 5,000 each month at a 36% annual interest rate, you could still be paying the same amount 7 to 8 years later. In the end, you might end up paying more than double the original amount.

Common Mistakes That Lead to a Debt Trap

1. Paying Only the Minimum Amount Due – This is the biggest mistake. It keeps you in debt longer while interest keeps piling up.
2. Overspending Beyond Your Income – Using the card as “extra income” instead of a payment tool leads to bills you can’t manage.
3. Multiple Credit Cards – Having too many cards means losing track of due dates and overspending without realizing it.
4. Cash Withdrawals on Credit Cards – This attracts immediate high interest plus additional fees from day one.
5. Ignoring Due Dates – Missing even one payment leads to late fees and higher interest, worsening the trap.

Why It’s Becoming a Real Problem—and How to Avoid It

The path into the credit card debt trap usually begins without much notice—sometimes from a spontaneous purchase or the lure of earning rewards. Many people think paying just the minimum is a safe way to manage their cards. But this approach quickly becomes risky as interest charges, often ranging from 42% to 46% per year, start piling up, especially after the interest-free period ends. Reports from India Today and The Indian Express highlight that even a slight delay in payments or small increases in RBI rates can trigger significant financial stress.

How to Avoid the Debt Trap in the First Place

• Treat your card like a debit card – Only swipe if you already have the money in your bank account.
• Pay your bill in full, every time – This keeps you safe from interest completely.
• Limit yourself to one card – Easier to track, easier to manage.
• Set up payment reminders – Never miss a due date.
• Avoid cash withdrawals – Use your debit card or UPI for emergency cash.

If You’re Already Trapped—Steps to Break Free

If you’re already caught in the cycle of credit card debt, don’t lose hope—there’s a way out. Start by creating a clear debt list: note each card’s balance, interest rate, minimum payment, and due date.

Falling into the debt trap of credit cards is not the end—it’s the start of your comeback plan.

1. Stop Using the Card Immediately – This prevents your balance from growing further.
2. Pay More Than the Minimum Due – Even small extra payments reduce your interest load faster.
3. Prioritize High-Interest Debt First – Pay off the most expensive card before the rest.
4. Consider a Personal Loan – A lower-interest loan to pay off your credit card can save money.
5. Negotiate With the Bank – Many banks offer settlement or restructuring options if you explain your situation.

The Bigger Picture – Learn, Don’t Repeat

Think back to your first time dealing with credit card debt as a warning sign. It’s not just about paying money—it’s about changing habits. Building an emergency fund, tracking expenses, and living within your budget are some of the most effective ways to protect yourself from falling into the same cycle again.

When used wisely, credit cards can provide convenience, rewards, and help in building a strong credit score. But if misused, they can quickly lead to serious financial trouble. The key is to stay in control of your card before the card starts controlling your life.