Here is exactly what minimum payments cost you — and a clear path out.
Minimum payment result
6 yrs 11 mo
paying $200.00/month
Total interest (minimum)
$6,580.35
paid on top of the $10,000 you borrowed
Fixed 3-year payoff
$351.52/mo
clears the debt in exactly 36 months
Total interest (3-year)
$2,654.76
total cost to escape this debt in 3 years
$3,925.59
saved by paying $351.52/month instead of $200.00/month
Payoff Strategy Comparison
Strategy
Monthly Payment
Time to Pay Off
Total Interest
Total Paid
Minimum payments only
$200.00
6 yrs 11 mo
$6,580.35
$16,580.35
Fixed 3-year payoff
$351.52
36 months
$2,654.76
$12,654.76
The fix: Commit to $351.52/month — $151.52 more than the minimum. This clears the debt in 3 years and saves $3,925.59 in interest.
How Minimum Payments Are Calculated
Credit card issuers typically set the minimum at the greater of $25 or 2% of the outstanding balance. For $10,000 at 15.99% APR, the minimum is $200.00/month. While this keeps you current with the lender, most of each payment goes to interest — not principal.
"Minimum payments are designed by banks to maximise interest collected -- not to help you get out of debt. The math is brutal. The strategy to beat it exists."