Minimum Payment Trap Calculator
Example: Current credit card balance: 5000 $ · Annual percentage rate (APR): 20 % · Minimum payment (% of balance): 2 % · Your chosen fixed monthly payment: 200 $
| Interest saved with fixed payment | $18,688 |
| Minimum payment — years to payoff | 43.67 |
| Minimum payment — total interest paid | $20,210 |
| Fixed payment — years to payoff | 2.75 |
Worked example
A $5,000 balance at 20% APR on minimum payments (2% of balance, minimum $25): payoff takes approximately 29 years and costs $7,735 in interest — $2,735 more than you borrowed. Switch to a fixed $200 monthly payment and payoff drops to 2.8 years at $1,458 in interest — saving $6,277 and 26 years. The minimum payment is not a payment plan; it is a subscription to permanent debt.
Frequently asked questions
Why do minimum payments shrink over time?
Most issuers set the minimum payment as a percentage of your outstanding balance (typically 1%–3%). As your balance shrinks, the minimum payment shrinks with it — which sounds good but actually slows repayment dramatically. In the first months, a large fraction of the minimum goes to interest. As the balance falls, the minimum falls too, but interest is still compounding on the remaining balance.
What is the CFPB credit card payoff rule?
Under the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009, credit card statements must show how long it will take to pay off the balance making only minimum payments, and what payment would pay off the balance in 3 years. Look for this disclosure on your statement — it gives you the exact numbers for your account.
Should I invest instead of paying off credit card debt?
Not if you carry a high-APR balance. Credit card rates of 20%–30% are guaranteed negative returns on every dollar not applied to the balance. No investment consistently returns 20%+ net of tax. The mathematically optimal order is: employer 401k match (free money) → high-interest debt (20%+) → emergency fund → then invest. Paying off credit card debt is the highest guaranteed return available to most consumers.