Key Highlights
- Effective from 15 July 2025, SBI Cards will calculate the Minimum Amount Due (MAD) using a new, component‑wise formula.
- The updated MAD includes 100% of GST, EMI, fees, finance charges, any over‑limit amount, and an additional 2% of the remaining retail balance.
- Payments will be applied in a strict order: GST, EMI, fees, finance charges, balance transfer, retail spends, and cash advance.
- Cardholders with revolving debt will likely see higher MAD payments, reducing the risk of evergreening.
- The change aims to increase billing transparency and enforce full settlement of interest‑generating charges.
Detailed Insights
The Minimum Amount Due is the smallest sum a cardholder must remit to keep the account active and avoid penalties. While it offers short‑term relief, paying only the MAD prolongs debt and accrues interest. SBI’s new formula addresses this by ensuring that all finance charges and fees are cleared each month, preventing them from rolling over and compounding.
Under the previous system, MAD could be as low as 5% of the sum of finance charges, retail spends, and cash advance, or, if that figure was less than the finance charges, it would default to 100% of finance charges plus fees and GST. The revised approach eliminates this loophole by mandating 100% payment of finance charges and adding a 2% surcharge on the outstanding retail balance, thereby tightening repayment discipline.
Payments are now allocated in a fixed sequence: first GST, then EMI, followed by fees, finance charges, balance transfer, retail spends, and finally cash advance. This hierarchy prioritises the most interest‑bearing components, ensuring they are settled before other charges.
For example, a cardholder with a retail purchase of ₹1,34,999.60, finance charge of ₹11,972.18, fees of ₹2,700, and GST of ₹2,640.99 will owe a new MAD of ₹20,013.16, up from ₹17,313.17 under the old calculation. The difference stems from the 2% of the remaining balance, which was previously omitted.
Key Concepts
- Minimum Amount Due (MAD): The least payment required to keep a credit card account in good standing.
- Revolving Debt: The portion of a credit card balance that is carried over from one billing cycle to the next.
- Finance Charges: Interest levied on unpaid balances, typically around 3% per month.
- GST: Goods and Services Tax applied to credit card transactions.
- EMI: Equated Monthly Installment, a fixed payment schedule for a loan or credit card balance.