Pakistani banks let you pay as little as 1% to 5% of the statement balance. It keeps the account current, but with markup rates of 34% to 45% per annum, the rest of the balance grows faster than most people expect.
Every credit card statement in Pakistan shows two numbers: the total balance and the minimum payment due. The minimum is small by design. Allied Bank sets it at 2% of principal plus markup and charges, HBL at 5% of the statement balance, Standard Chartered at 1% of principal plus interest, fees and instalments. Paying it keeps you out of the late-payment column, and that is the only good thing about it.
What the minimum actually covers
Banks apply your payment in a fixed order, and it is printed in the Summary Box: markup first, then service charges and fees, then late charges, then the annual fee and FED, and only at the end the principal. A minimum payment on a revolving balance is therefore absorbed almost entirely by charges, and the principal barely moves. The Summary Box of the Allied Visa card puts it bluntly: a customer who pays only the minimum ends up paying more, over a longer period, to get rid of the same debt.
How markup grows on the rest
Pakistani card rates are among the highest in the region. Standard Chartered’s MID lists 45% per annum, HBL’s schedule up to 42%, Allied’s 34%. Markup is calculated daily on the outstanding amount from the transaction date until the balance is paid in full, and once you carry any balance, the interest-free period on new purchases is lost too. A rough illustration: Rs. 100,000 carried at 42% per annum costs about Rs. 3,500 in markup a month. Pay a 5% minimum of Rs. 5,000 and only about Rs. 1,500 goes to principal; at that pace the balance takes years to disappear, and FED on the charges adds to the bill.
The cheaper alternatives
If you cannot pay in full, there are three tools that cost less than revolving. The first is the bank’s instalment plan, which converts a purchase into fixed monthly payments at a lower published rate; HBL prices its Instalment Plan at 24% per annum and Standard Chartered its Aasan Installment at 42%, both below the standard revolving rate at those banks. The second is a balance transfer to a card with a lower BTF rate, such as Allied’s 24%, paying a flat fee to move the debt. The third is a personal loan at a fixed rate, which at 20% to 36% per annum is cheaper than any card rate and forces a fixed end date.
A plan to clear the balance
Start by stopping new purchases on the card, because every new transaction on a revolving balance accrues markup from day one. Then set a fixed monthly amount well above the minimum, for example 15% or 20% of the balance, and pay it on the same date each month. If the balance is large, move it to an instalment plan or a balance transfer and treat the instalment as a bill. Above all, avoid cash advances: they have no interest-free period at any Pakistani bank, they carry a fee of 3% or a flat Rs. 500 to Rs. 1,200 per withdrawal, and they accrue markup from the moment the notes leave the ATM.
Why banks allow such a low minimum
The low minimum is not a favour. A cardholder who revolves is the most profitable customer a card business has, because markup at 34% to 45% per annum on a balance that never shrinks is worth far more than any annual fee. The State Bank of Pakistan requires banks to disclose this in the Summary Box precisely because the incentive runs against the customer. Use the minimum only in a month when you genuinely cannot pay more, and treat it as an alarm, not as the amount you owe.
