The minimum payment on a credit card is designed to keep your account in good standing, not to get you out of debt. On a typical card, the minimum is a small percentage of the balance plus interest, which means most of each payment goes to the issuer rather than to what you owe.
Consider a $5,000 balance at a 24 percent APR. Paying only the minimum can stretch repayment beyond a decade and cost thousands of dollars in interest. Paying a fixed $250 a month instead clears the same balance in roughly two years, with a fraction of the interest.
Every extra dollar works harder
Because interest is calculated on the remaining balance, any amount above the minimum reduces next month’s interest charge too. The effect compounds in your favor. Even rounding your payment up to the next $50 makes a measurable difference over a year.
Pick a strategy and stick with it
If you carry balances on several cards, two approaches work well. The avalanche method targets the highest APR first and saves the most money. The snowball method pays off the smallest balance first and builds momentum through quick wins. Either beats spreading small extra payments randomly.
Your statement includes a minimum payment warning that shows how long payoff takes at the minimum and how much you would need to pay to finish in three years. It is one of the most useful numbers on the page, and one of the most ignored.
