Here is exactly what minimum payments cost you — and a clear path out.
Minimum payment result
6 yrs 11 mo
paying $1,000.00/month
Total interest (minimum)
$32,901.76
paid on top of the $50,000 you borrowed
Fixed 3-year payoff
$1,757.60/mo
clears the debt in exactly 36 months
Total interest (3-year)
$13,273.82
total cost to escape this debt in 3 years
$19,627.94
saved by paying $1,757.60/month instead of $1,000.00/month
Payoff Strategy Comparison
Strategy
Monthly Payment
Time to Pay Off
Total Interest
Total Paid
Minimum payments only
$1,000.00
6 yrs 11 mo
$32,901.76
$82,901.76
Fixed 3-year payoff
$1,757.60
36 months
$13,273.82
$63,273.82
The fix: Commit to $1,757.60/month — $757.60 more than the minimum. This clears the debt in 3 years and saves $19,627.94 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 $50,000 at 15.99% APR, the minimum is $1,000.00/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."