Minimum Payment Trap Calculator
See how long it takes to pay off your card debt by only paying the bare minimum.
Repayment Summary
Total Time to Pay Off:
Total Interest Charges:
Total Amount Paid:
What is the Credit Card Minimum Payment?
Credit card issuers generally calculate your minimum monthly payment as the higher of a fixed dollar amount (like $25) or a small percentage of your outstanding balance (usually 1% to 3%), plus any new interest and fees. While this payment keeps your account in good standing, it is designed to keep you in debt for as long as possible.
The "Minimum Payment Trap" Explained
Because the minimum payment is often only slightly higher than the monthly interest charge, a very small portion of your money goes toward reducing the actual principal balance. This leads to a cycle where the debt persists for decades. For example, if you owe $5,000 at a 22% APR and only pay the 2% minimum, it could take over 20 years to pay off the balance, and you would end up paying more in interest than the original debt itself.
Example Calculation
Imagine you have a $3,000 balance with a 20% APR. If your minimum payment is 3% of the balance:
- Month 1: Your balance is $3,000. Interest is roughly $50. Your minimum payment is $90. Only $40 goes toward the debt.
- Month 100: You are still paying off the original purchase, and the total interest paid is already approaching the original $3,000.
How to Escape Credit Card Debt Faster
To avoid the trap shown by this calculator, consider these strategies:
- Pay More Than the Minimum: Even an extra $50 a month can shave years off your repayment timeline.
- Debt Avalanche: Focus on paying off the card with the highest APR first while maintaining minimums on others.
- Balance Transfers: Move high-interest debt to a 0% APR introductory card to ensure 100% of your payment hits the principal.