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Most people know that paying only the minimum on a credit card is a bad idea. Fewer people know exactly how bad.
Here’s the number: at the current average credit card APR of around 22%, paying only the minimum on a $5,000 balance will take you roughly 20 years to pay off. And by the time you’re done, you’ll have paid close to $7,000 in interest on top of the original $5,000.
You borrowed $5,000. You’ll pay back nearly $12,000.
Why minimum payments are designed this way
Minimum payments are typically calculated as a percentage of your outstanding balance — usually around 2%. That sounds manageable, but the math works against you in two ways at once.
First, most of that minimum payment goes toward interest, not principal. At 22% APR, roughly $92 of every $100 minimum payment on a $5,000 balance covers interest. About $8 actually reduces what you owe.
Second, as your balance slowly shrinks, your minimum payment shrinks with it. So you’re paying less each month, which just causes your debt to drag on further.
What happens if you pay a fixed amount instead
One of the best solutions to the minimum payment trap is to pay a fixed amount instead.
If you pay $200 a month on that same $5,000 balance at 22% APR, you’re out of debt in about 34 months — not 20 years — and you’ll pay roughly $1,700 in interest instead of $7,000. That’s a difference of more than $5,000, and it comes entirely from choosing a fixed payment over a declining one.
If you can push that to $300 a month, you’re done in about 20 months.
The balance transfer option
Moving that $5,000 to a card with a 0% intro APR for 18 to 21 months means every dollar of your payment goes directly toward the principal for almost two years.
At $246 a month, you’d pay off $5,000 in exactly 21 months and pay $0 in interest. The only cost is the balance transfer fee, typically 3% to 5% of the transferred amount, so between $150 and $250 on a $5,000 balance. Compare that to $7,000 in interest and the fee pays for itself in the first month.
You can compare some of the best balance transfer cards available right here.
What this actually means for your monthly budget
The minimum payment on a $5,000 balance starts around $100 a month. After 20 years of paying it, you’ll have paid out nearly $12,000. A $200 fixed payment cuts that to 34 months and roughly $6,700 less in interest. And for only about $45 more a month and the help of a balance transfer card, you can be free and clear in 21 months with a grand total of $0 interest paid.
The only decision is which number you want to live with.
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