Credit card debt is expensive because interest compounds on your balance. The good news is that small changes in how much you pay each month make a big difference.
Why minimum payments keep you stuck
Minimum payments are designed to be low, which keeps you in debt longer. Most of the payment goes to interest, and the balance barely moves.
See the difference with real numbers
Take a $5,000 balance at 22% APR:
- Paying $200 per month takes about 34 months and costs roughly $1,750 in interest.
- Paying $300 per month takes about 20 months and costs roughly $1,000 in interest.
An extra $100 a month saves about 14 months and around $750.
Two popular payoff methods
- Avalanche: pay minimums on every card, and put all extra money toward the card with the highest interest rate. This saves the most money.
- Snowball: put extra money toward the smallest balance first. You pay slightly more interest, but quick wins keep many people motivated.
The best method is the one you will actually stick with.
Calculate your own payoff date
Enter your balance, APR, and monthly payment into a credit card payoff calculator to see your payoff date and total interest. If you have several debts, a debt payoff calculator can help you compare strategies.
More ways to speed things up
- Pay as much as you can over the minimum, even $25.
- Ask your card issuer about a lower interest rate.
- Consider a balance transfer card with a 0% intro rate, and check the transfer fee first.
- Stop adding new charges while you pay down the balance.
- Put bonuses and tax refunds toward the debt.
This article is for general information only and is not financial advice.
