Here is exactly what minimum payments cost you — and a clear path out.
Minimum payment result
8 yrs 4 mo
paying $600.00/month
Total interest (minimum)
$29,867.40
paid on top of the $30,000 you borrowed
Fixed 3-year payoff
$1,099.53/mo
clears the debt in exactly 36 months
Total interest (3-year)
$9,583.03
total cost to escape this debt in 3 years
$20,284.37
saved by paying $1,099.53/month instead of $600.00/month
Payoff Strategy Comparison
Strategy
Monthly Payment
Time to Pay Off
Total Interest
Total Paid
Minimum payments only
$600.00
8 yrs 4 mo
$29,867.40
$59,867.40
Fixed 3-year payoff
$1,099.53
36 months
$9,583.03
$39,583.03
The fix: Commit to $1,099.53/month — $499.53 more than the minimum. This clears the debt in 3 years and saves $20,284.37 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 $30,000 at 18.99% APR, the minimum is $600.00/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."