Money Credit card calculator: the minimum payment trap
With minimum payments the payment shrinks along with the balance, so paying off often takes many years. Compare that with a fixed monthly amount.
Simplified, without new purchases or fees. Your card agreement has the exact terms.
Why the minimum payment is so expensive
The minimum payment is usually a small percentage of the balance. As the debt shrinks, so does the payment. At first most of it goes to interest, and repayment drags on for years. For the card issuer, that is good business.
The way out: a fixed amount
If you pay the same fixed amount every month, the balance falls faster and faster because the interest part shrinks. Set up a fixed payment if you can and stop using the card until it is paid off.
Consider consolidating
A personal loan often costs much less interest than a credit card. It only pays off if you don't run the card up again. The Money Compass debt plan shows what refinancing could bring.
Frequently asked questions
How high is credit card interest?
In the US often 20 % APR or more, in Germany 14 to 25 % for revolving credit. Your statement shows your exact rate.
Can I change my minimum payment?
Many issuers let you pay more or set up autopay for a fixed amount or the full balance in the app.
What if I can no longer pay?
Talk to your card issuer early and get help from a free, nonprofit credit counselling service.