PmtCalcWhy minimum payments take so long
Card minimums are usually a small percentage of the balance, often 1% plus that month’s interest, or about 2% to 3%. As the balance falls, the minimum falls with it, so most of each payment keeps going to interest. A few thousand dollars can take more than a decade to clear. Your statement is required to show this too: the CARD Act makes issuers print how long minimum payments will take.
Example
A $6,000 balance at 22.9% APR paid at $250 a month is gone in 33 months, with about $2,100 in interest. Paying only a typical minimum of 1% of the balance plus interest would take almost 21 years and cost over $10,000 in interest.
Ways to pay less interest
- Pay a fixed amount instead of the shrinking minimum.
- Move the balance to a 0% balance-transfer card (watch the transfer fee and the end date).
- Consolidate with a lower-APR personal loan; compare in the debt consolidation calculator.
- With several cards, put extra toward the highest APR first; compare that with smallest-balance-first in the debt snowball vs. avalanche calculator.
Frequently asked questions
How is credit card interest calculated?
Most cards charge daily interest on your average daily balance at APR ÷ 365. This calculator uses APR ÷ 12 on the monthly balance, which is very close for planning.
Do new purchases matter?
Yes. The calculator assumes you stop using the card. New charges add to the balance and push the payoff date out.
What payment do I need to be debt-free by a date?
Choose “Pay off by a target date” and enter the number of months. The calculator finds the fixed payment that clears the balance in time.
Sources
Last reviewed . How we review and test pages.