Here is exactly what minimum payments cost you — and a clear path out.
Minimum payment result
8 yrs 4 mo
paying $300.00/month
Total interest (minimum)
$14,933.70
paid on top of the $15,000 you borrowed
Fixed 3-year payoff
$549.76/mo
clears the debt in exactly 36 months
Total interest (3-year)
$4,791.58
total cost to escape this debt in 3 years
$10,142.12
saved by paying $549.76/month instead of $300.00/month
Payoff Strategy Comparison
Strategy
Monthly Payment
Time to Pay Off
Total Interest
Total Paid
Minimum payments only
$300.00
8 yrs 4 mo
$14,933.70
$29,933.70
Fixed 3-year payoff
$549.76
36 months
$4,791.58
$19,791.58
The fix: Commit to $549.76/month — $249.76 more than the minimum. This clears the debt in 3 years and saves $10,142.12 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 $15,000 at 18.99% APR, the minimum is $300.00/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."