Eliminate credit card debt by paying more than the minimum balance.
Paying only the minimum keeps balances around for years and makes purchases cost far more than the sticker price. That point hasn’t changed. One of the simplest as well as most efficient ways to reduce and get out of credit card debt is to pay more than the minimum amount each month. Every extra dollar you send knocks down interest costs faster than it did a few years ago as the extra goes to principal and learn all about the advantages of paying more than the minimum on your credit card(s). Americans typically carry several cards and a meaningful revolving balance. Over the years, industry snapshots place the average number of cards in active use at about 3.5 to 4 card per person and the average balance per borrower in the $6 to $7,000s. If you revolve that kind of balance at today’s rates, interest compounds quickly, so the “pay more than the minimum” rule matters even more.
How paying more than the minimum changes the math
Your statement must show two key disclosures: how long payoff takes if you make only the minimum and the monthly amount needed to pay off in 36 months, based on your current balance and no new spending. That’s required under the CARD Act and CFPB regulations, and it’s designed to make the trade-offs crystal clear. We have an example below or find another free to use calculator for doing the match on paying more than the minimum at Bankrate https://www.bankrate.com/credit-cards/tools/credit-card-payoff-calculator/ . Here is a simple, realistic illustration. Assume a $7,200 balance at a 22% APR, no new charges or fees, and a common minimum formula of “interest plus 1% of the balance.” With just the minimum, you’re in it for decades; commit to a fixed number that’s higher than the minimum and the timeline collapses. Payment approach Time to payoff Approx. interest paid $204 Minimum only (interest + 1% of balance) ~22 years ~$12,133 $250 every month ~42 months ~$3,132 $350 every month ~27 months ~$1,921 This example is illustrative only; your statement shows your exact 36-month payment and minimum-only timeline for your balance. The takeaway is the same as your original page: even a modest bump above the minimum has an outsized impact because it cuts principal sooner and reduces compounding interest. Therefore the extra money paid each month, no matter how much or how little it is, will make a significant impact to the customer’s finances. So if you only make the minimum payment, it will take you 22 years to payoff your credit card balance in the first row. Not only that, but for borrowing $7,200, you will end up paying a total of ~$19,300 in total fees, principal, and interest expenses. This dollar amount is almost incomprehensible. So you will have to pay back almost 3 times the amount that you borrowed. With the amount of borrowing that the average consumer has, it can be very difficult (if not impossible) for individual's to get out of debt if they just pay the minimum each month. People should try types of debt consolidation for their credit cards. As this can help address debt and also possibly reduce the number of cards, and ideally interest rate, as a lower rate will allow more of your payment to pay off the principal. Lets try another way to put this in perspective . Many people shop for the lowest prices when buying a product, or they may often comparison shop between retailers. Most people do what it takes to find a “good deal.” So you may spend time shopping around for a deal on a product, trying your best to save money, then end paying thousands of dollars in interest costs. So much for the time spent finding a good deal. Think about it this way, when you make the purchase using your credit card, and pay any amount of interest, no matter how small, that good deal or cheap price you received just vanished . People should always review different lenders and the services they offer and find more details on best credit cards for rates as those lower rates are also very beneficial. If you do need to use a credit card, you need to be sure to pay more than the minimum amount due each month. If you do not want to use a debt management plan or find other assistance, then the best way to win the battle with your your credit cards is to pay off all of your credit cards in an aggressive fashion. You need to control your spending and behavior to get out of, and stay out of debt.
Options if you’re struggling to pay more than the minimum
If you think you’ll miss a minimum monthly credit card payment or you’re already behind, contact your card company right away with details here on various credit card issuer assistance programs . Companies often offer hardship arrangements that can temporarily reduce your rate, lower the minimum, waive certain fees, or set up a structured payoff. All of those options, and others, can provide time for you to get back on track with making future minimum payments. You need to act soon though - even before you start to struggle. As it more likely to get help especially when you call before the account is severely delinquent. The CFPB recommends starting with your issuer, and some companies publish relief options publicly.