Here is exactly what minimum payments cost you — and a clear path out.
Minimum payment result
13 yrs 11 mo
paying $200.00/month
Total interest (minimum)
$23,388.76
paid on top of the $10,000 you borrowed
Fixed 3-year payoff
$387.05/mo
clears the debt in exactly 36 months
Total interest (3-year)
$3,933.55
total cost to escape this debt in 3 years
$19,455.21
saved by paying $387.05/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
13 yrs 11 mo
$23,388.76
$33,388.76
Fixed 3-year payoff
$387.05
36 months
$3,933.55
$13,933.55
The fix: Commit to $387.05/month — $187.05 more than the minimum. This clears the debt in 3 years and saves $19,455.21 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 22.99% 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."