Labour Law Advisor Exposes The Shocking Truth About Credit Cards: How Banks Profit From Your Debt Trap
Labour Law Advisor (Mandeep) exposes the shocking truth about credit cards in India, revealing how banks profit from debt traps and how to use cards smartly to avoid financial ruin.
Did you know that 50% of a credit card company’s revenue comes from interest income, even though you get a 45-day interest-free period? In a bombshell exposé that is sending shockwaves through India’s financial landscape, YouTuber Labour Law Advisor (Mandeep), also known as Money Minded Mandeep, pulls back the curtain on the dark side of credit cards, revealing how millions are falling into a Credit Card Debt Trap India and how the system is meticulously designed to make you spend, not save.
The video begins with a stark look at the profit and loss statement of a major credit card company, showing that out of ₹18,637 crore in total revenue, a staggering ₹9,347 crore—over 50%—is generated from interest income. This immediately begs the question: “Who is paying this interest? Who are these people? Where do they come from?”
The Debt Trap: A Crisis of “Common Sense”
Mandeep argues that while the golden rule of credit cards is simple—they are for those who do not need them—a shocking 2.8 crore (28 million) out of 11 crore Indian credit card users lack this “common sense.” He illustrates the devastating consequences with real-life examples:
- A friend’s sister accumulated ₹1 lakh in credit card debt and 12 active EMIs from loan apps, spent on vacations, expensive shoes, and online courses, now harassed by recovery agents.
- A 23-year-old living in a girls’ PG amassed ₹2.5 lakh in debt from beauty salons, clothes, iPhones, and cabs, forced to keep her phone switched off to avoid recovery agents.
These stories highlight the brutal reality of the credit card interest rates India imposes, often 3-4% per month, translating to a staggering 40-50% per annum. Mandeep reveals a crucial detail: if you pay only the minimum amount due, you forfeit your interest-free period, and interest is charged from the day of the transaction, compounding on previous interest.
“Your debt is compounding at a rate of 40-50%,” Mandeep warns, explaining why minimum payments only deepen the debt spiral. These “revolvers,” comprising 25% of all credit card users, are the primary engine of credit card company profits.
The Myth of “Exploiting” Rewards & The No-Cost EMI Scam
Mandeep also debunks the myth that users are “exploiting” reward points. He reveals that over 40% of credit card revenue comes from fees and merchant commissions (Merchant Discount Rate), which increase with spending. The system is designed to incentivize spending, not to give away freebies.
He uses his own Axis Atlas card as an example, showing that to earn ₹1,08,000 in hotel rewards, he had to spend ₹15 lakh. While a 7.2% reward rate is good, he questions if the average person spends that much annually on non-essential items.
The exposé also tackles the deceptive “No-Cost EMI scam.” Mandeep explains that these are not interest-free loans. Instead, the shopping portal gives an upfront discount, and the “interest” is baked into the higher EMI price. Sellers are willing to take a hit because it encourages more spending and attracts customers who couldn’t afford the item upfront.
How to Outsmart the System: Mandeep’s Golden Rules
Despite the grim picture, Money Minded Mandeep offers a lifeline, providing actionable strategies to use credit cards smartly:
- Basic Discipline: Always pay the total bill on or before the due date. Set up auto-pay.
- Credit Utilization Ratio (CUR): Keep spending to 30-40% of your total credit limit across all cards to maintain a healthy CIBIL score.
- Taming the Beast: Pre-pay your monthly expenses to your credit card to limit spending to only what you’ve allocated.
- Strategic Rewards: Use specialized cards (Amazon, Flipkart, fuel, Swiggy, RuPay UPI) for rewards on expenses you would make anyway.
He concludes with a powerful reminder: “Buy only those things with a credit card that you would have bought even if you didn’t have one.”
Mandeep’s video is a crucial guide for navigating the complex world of credit cards, empowering consumers to avoid the credit card debt trap India is increasingly facing. His call for transparency and financial literacy is a must-watch for anyone with a credit card.
Are you stuck in a credit card debt trap? What are your strategies for using credit cards smartly? Let us know in the comments!
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