The Danger of Minimum Payments

Most credit card companies set the minimum payment at a very low percentage (often 2-4%) of the balance. Because interest rates on cards are high (often 20-40% APR), a minimum monthly payment barely covers the interest, meaning you pay very little toward the actual debt.

Payoff Strategies:

• Fixed Monthly Amount: Picking a fixed amount (e.g., $200) ensures you pay off the balance much faster than the minimum method.
• Debt Avalanche: Pay off the card with the highest interest rate first.
• Debt Snowball: Pay off the smallest balance first for a psychological win.

APR explained

Annual Percentage Rate (APR) is the yearly interest charge. However, interest is usually calculated **daily**. Our calculator uses monthly compounding for the most common estimation.