That "" on your credit card statement seems so manageable. That's by design. It's also a trap.
How Minimum Payments Work
Credit card companies set minimums at about 1-3% of your balance. Just enough to keep you paying forever.
$5,000 balance at 20% APR, $100 minimum payment:
| What You Think | The Reality |
|---|---|
| "I'm paying it off" | 90% goes to interest |
| "I'll be done soon" | Takes 9+ years |
| "I'm saving money" | You pay $9,000+ total |
The Math That Hurts
Every month, most of your minimum payment goes to interest, not principal.
Month 1 on $5,000 at 20% APR:
- Minimum payment: $100
- Interest charged: $83.33
- Principal paid: $16.67
- New balance: $4,983.33
You paid $100 but only knocked off $17 from what you owe.
Breaking Free
The Minimum + Extra Strategy
| Strategy | Time to Pay Off | Total Paid |
|---|---|---|
| Minimum only ($100) | 9 years | $9,000+ |
| Minimum + $50 | 4 years | $6,500 |
| Minimum + $100 | 2.5 years | $5,800 |
Every extra dollar goes directly to principal.