Here is exactly what minimum payments cost you — and a clear path out.
Minimum payment result
10 yrs
paying $600.00/month
Total interest (minimum)
$41,837.02
paid on top of the $30,000 you borrowed
Fixed 3-year payoff
$1,130.10/mo
clears the debt in exactly 36 months
Total interest (3-year)
$10,683.50
total cost to escape this debt in 3 years
$31,153.52
saved by paying $1,130.10/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
10 yrs
$41,837.02
$71,837.02
Fixed 3-year payoff
$1,130.10
36 months
$10,683.50
$40,683.50
The fix: Commit to $1,130.10/month — $530.10 more than the minimum. This clears the debt in 3 years and saves $31,153.52 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 20.99% 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."