How credit card interest works
Card issuers quote an annual rate (APR) but charge interest daily on your balance, which works out to roughly APR ÷ 12 each month. At 23% APR that’s about 1.9% of your balance every month. If your payment barely exceeds that interest, almost nothing goes toward the balance — which is why paying only the minimum can take decades.
Why the minimum payment is so expensive
A $5,000 balance at 22.99% APR, with no new purchases:
Doubling the payment from $100 to $200 cuts the interest by more than 80%.
Strategies to pay off cards faster
- Avalanche: pay minimums on every card and put extra money on the highest-APR card first. This saves the most interest.
- Snowball: put extra money on the smallest balance first. It costs a bit more but the quick wins keep many people motivated.
- Balance transfer: a 0% intro APR card can stop interest for 12–21 months; watch for a 3–5% transfer fee and the rate after the promo ends.
- Call your issuer: asking for a lower APR works more often than people expect, especially with a good payment history.
Related Debt Elimination & Credit Tools
Retiring revolving credit card debt frees up vital cash flow for wealth accumulation. Compare the mathematical Avalanche versus Snowball strategies with our Debt Payoff Calculator, explore low-rate consolidation alternatives using the Loan Calculator, restructure personal cash flow with the Budget Calculator, and build a protective safety net using our Emergency Fund Calculator.
Frequently asked questions
Why does the calculator say my payment is too low?
If the payment is less than or equal to the monthly interest, the balance never goes down. You need to pay more than the interest charge for any money to reach the principal.
How is the credit card minimum payment calculated?
Most US issuers use 1% of the balance plus that month's interest and fees, with a floor of about $25–$35. The minimum shrinks as the balance falls, which stretches repayment out even further.
Does paying off a card improve my credit score?
Usually yes. Lower balances reduce your credit utilization ratio, one of the largest factors in FICO and VantageScore. Keeping utilization under 30% — ideally under 10% — helps most.