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Does Paying an Extra $50 a Month on Your Credit Cards Really Make a Difference?

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If you carry a credit card balance, you are probably aware that your minimum payment each month isn't very high. Generally, card issuers charge you a minimum payment of around 2% to 4% of your outstanding balance or charge you a monthly minimum of around $25 or $30 when your balance is low.

If you're interested in becoming debt-free sooner, you may be considering paying extra to your credit cards. But what if you don't have a ton of spare cash to throw at the debt? Maybe you only have around $50 extra per month in your bank account to make use of. Will that really make a difference in how fast your cards get paid off?

How much of a difference does a $50 extra monthly payment make?

An extra $50 a month can actually make a huge difference in terms of when you will be able to get your credit card balance paid down to $0.

Say, for example, you have a $5,000 balance on a credit card, the interest rate is 20.68% (the current national average), and your minimum payment is the lesser of 2% of the card's balance or $25.

Here's what would happen if you made a $50 extra monthly payment, versus not doing so:

Payoff Option Years to Be Debt Free Total Interest Paid
With the $50 Extra Payment 7 $3,655
Without the $50 Extra Payment 51.4 years $25,003
Data source: Author's calculations

The extra payment enables you to pay off your debt 44.4 years sooner than if you only made minimum payments. And you would save a whopping $21,348 in interest charges thanks to that extra $50 a month.

Why does paying an extra $50 a month make such a big impact?

Paying an extra $50 a month on your credit cards can bring your debt balance down much more quickly than if you only pay the minimum due. This is because your card's required minimum payment goes almost entirely to interest and doesn't make much of a dent in the principal balance at all.

Let's say you made only the 2% minimum payment due on a $5,000 balance. Here's what would happen during your first year:

Starting Balance Annual Payments Amount Going Toward Interest Ending Balance
$5,000 $1,182 $1,081 $4,837
Data source: Author's calculations

At this rate, it's not surprising that you'd end up taking 51.4 years to become debt free since your monthly payment would be doing pretty much nothing except lining the pockets of your credit issuer.

The extra $50 a month goes right to reducing your principal balance, though. So you end up actually reducing the debt you owe by much more with each payment, rather than paying only a tiny bit extra after covering the interest.

Now, it may seem challenging to find an extra $50 a month. But you likely have options if you look carefully at your budget. You may find you can cut out a streaming service or two, or stop paying for an activity your kids don't really enjoy any more. If you can look at where your spending is going and try to free up that $50, it will be well worth it when you become debt-free dozens of years sooner.

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