Minimum Payment Trap
See the true cost of paying only minimum payments on your debt.
Who This Is For
If you've been making only the minimum payment on a credit card or loan, this calculator shows you the true cost. It's an eye-opener for anyone wondering why their balance barely seems to go down.
Example Scenario
A $5,000 credit card at 22% APR with a 2% minimum payment ($25 floor) takes over 27 years to pay off with minimums alone, costing more than $8,000 in interest.
Adding just $100/month extra cuts it to about 3 years and saves you thousands.
How It Works
This calculator compares two scenarios: paying only the minimum payment versus adding extra payments. The results often shock people.
Typical credit card minimums are 2-3% of the balance with a $25-35 floor. At these rates, it can take decades to pay off debt.
Assumptions and Formula
Assumptions used in this model:
- Minimum payment follows percentage with a fixed dollar floor.
- APR is stable and interest compounds monthly.
- Extra payment is fixed and applied every month.
Minimum formula: required payment = max(balance × minimum %, payment floor). When balance is high, the percent drives; near payoff, the floor drives.
How to Interpret Your Results
| Signal | What It Means | Action |
|---|---|---|
| Payoff time measured in decades | You are in a minimum-payment trap | Set a fixed payment target above minimum |
| Extra $50 saves years | Small payment changes have nonlinear impact | Automate even a modest extra amount |
| Interest exceeds principal progress | Debt cost is compounding faster than payoff | Prioritize highest APR debt first |
Frequently Asked Questions
Deep Dive Guide
Read how to escape the minimum payment trap
Exact tactics to stop revolving debt and accelerate principal payoff.
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