How the calculation works
Every month the card charges interest on the outstanding balance at the monthly rate i = APR / 12. The minimum payment is usually defined as a percentage of the balance (2–3%) plus the period's interest, with a floor (e.g. $25). Because the minimum drops as the balance drops, it takes an extremely long time to clear the debt — nearly all of it goes to interest. A fixed payment stays the same each month, so principal falls much faster and interest collapses.
Worked example
A $5,000 balance at 22% APR with a 2% minimum can take over 20 years to clear and cost more than $6,000 in interest. A fixed $200/month payment kills the balance in about 32 months with under $1,500 in interest. Real difference: over $4,500 saved and nearly 18 years of freedom.
Common mistakes
- Paying only the minimum. The single most expensive habit in retail banking.
- Continuing to spend on the card. Each new charge resets the clock and multiplies interest.
- Confusing interest rate with APR. APR includes fees and gives the real annualized cost.
- Not using 0% balance transfers. Used well, they accelerate payoff at no financing cost.
- Ignoring revolving credit clauses. They can push the effective rate above 25%.
Frequently asked questions
How much should I pay? As much as you can without breaking the rest of your budget. Target: clear it in under 24 months.
Consolidate into a personal loan? Yes if you can get a clearly lower APR (under 10%) and you stop charging the card.
Close the card once cleared? Usually keep it open unused to preserve credit history, but resist the temptation.
What if the minimum only covers interest? The debt never shrinks. You must pay more than the interest accrued each month.
Does the snowball method work? Yes across multiple cards. For maximum math savings, use avalanche (highest APR first).