Why do minimum payments trap people?
Minimum payments cover mostly interest. On $5,000 at 22% APR with 2% minimums, payoff takes over 20 years and costs more than the original balance in interest.
Calculate how long to pay off credit card debt and total interest cost. Compare minimum vs extra payments to find the fastest payoff strategy.
Payoff months = −log(1 − r × P / M) / log(1 + r), where r = monthly APR, P = balance, M = monthly payment.
A $5,000 balance at 22% APR with $150/month payments takes ~54 months to clear, with ~$2,900 in interest. Bumping to $250/month cuts it to 25 months and $1,150 in interest.
Minimum payments cover mostly interest. On $5,000 at 22% APR with 2% minimums, payoff takes over 20 years and costs more than the original balance in interest.
Yes — a 22% guaranteed 'return' from paying off a card beats any expected market return. Always clear high-APR debt first.
Move debt to a 0% intro-APR card (usually 12–21 months) for a 3–5% fee. Break-even at ~4 months of interest saved.
Yes — it lowers your credit utilisation limit and shortens average account age. Better to keep old cards open with a small recurring charge.
APR is the annual rate. APY includes compounding — the true cost. A 22% APR compounding daily is ~24.6% APY.