Credit Card Payoff Guide: Minimums & Interest

Credit card debt is the most expensive debt most households carry — APRs of 20–28% are common, and interest compounds daily. Making only the minimum payment stretches repayment over decades and multiplies the original balance. This guide explains the math and the two payoff strategies that actually work.

Daily Compounding Interest

Example: a $5,000 balance at 24% APR. Daily rate = 0.0658%, so day 1 interest = $3.29. After 30 days, you've added ~$100 in interest to the balance, and next month's interest compounds on $5,100.

The Minimum-Payment Trap

Minimum payments are typically 1–3% of the balance or $25–$35, whichever is greater. They're designed to keep you paying for years. On a $5,000 balance at 24%, the 2% minimum ($100) covers interest ($100/month) almost exactly — meaning almost nothing goes to principal.

$5,000 at 24% APR, paying only the 2% minimum: payoff takes ~25 years and total interest paid exceeds $8,000. The original $5,000 costs you over $13,000.

Avalanche vs. Snowball

Two popular strategies for paying off multiple cards:

• Avalanche — pay the minimum on all cards, then throw every extra dollar at the highest-APR balance first. Mathematically optimal — saves the most interest.
• Snowball — pay the smallest balance first, regardless of rate. Psychologically motivating — quick wins keep you going.

Avalanche saves more money; snowball keeps more people committed. Pick the one you'll actually stick with.

Put It Into Practice

Enter your balance, APR, and what you can pay monthly to see how long payoff takes and how much interest you'll pay — then compare to a higher payment.