Here is exactly what minimum payments cost you — and a clear path out.
Minimum payment result
8 yrs 4 mo
paying $200.00/month
Total interest (minimum)
$9,955.80
paid on top of the $10,000 you borrowed
Fixed 3-year payoff
$366.51/mo
clears the debt in exactly 36 months
Total interest (3-year)
$3,194.34
total cost to escape this debt in 3 years
$6,761.46
saved by paying $366.51/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
8 yrs 4 mo
$9,955.80
$19,955.80
Fixed 3-year payoff
$366.51
36 months
$3,194.34
$13,194.34
The fix: Commit to $366.51/month — $166.51 more than the minimum. This clears the debt in 3 years and saves $6,761.46 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 18.99% 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."