Credit card debt is a common issue that many people face. When it comes to your credit card debt, how long do you think it would take it pay it off if you only made the minimum monthly payments?
It’s easy to fall into making the minimum payments. After all, it’s a lower amount. And if you make automatic payments electronically, that monthly payment becomes almost invisible due to how it’s instantly transferred from your bank account to the credit card company.
You could be in for a long ride if you only make the minimum payment on your credit card balance. This article will explore how long it would take to pay off your credit card if you only make the minimum payments, followed by three tips for paying off your credit card balances faster.
Paying Only the Minimum on Your Credit Cards
Most credit card companies require that you pay a minimum payment, which is a percentage of the total balance. This amount is typically around 2%-3% of the balance, or about $25 per month, whichever is greater.
It may take years to pay off the balance by only paying the minimum, and you will pay more interest over time.
What If You Increase Your Credit Card Payment Amount?
For instance, imagine you have a credit card balance of $5,000 with an interest rate of 20%. If you only make the minimum payment, it will take you over 18 years to pay off the balance. You would pay over $8,600 in interest alone, making your total payments over $13,600. If you were to make monthly payments of $250 (which is approximately 5% of the balance), you could pay off the balance in just over two years, with only paying around $1,700 in interest.
You can use a credit card payoff calculator to experiment with different payments and timeframes to see what this looks like for your situation.
Which Lenders Have the Best Debt Consolidation Loans
Consolidating your credit card debt into one loan can save you hundreds of dollars in interest. Use the AmONE debt consolidation loan finder below to sort through the list to find loan that fits your financial goals.
Tips for Making Progress on Paying Off Your Credit Card Debt
As you can see, making more than the minimum payment greatly impacts how long it takes to pay off your debt and how much money you’ll spend in interest. However, if your interest is high, you might feel like you’re barely chipping away at that debt.
Here are some tips if that’s the case.
Tip #1: Transfer Your Balance to a 0% Interest Credit Card
One of the ways you can pay off your balances more quickly is by transferring it to a credit card with a 0% introductory rate. These offers let you transfer your balance from a high-interest credit card to a new one with no interest for a certain period. The no-interest period generally ranges from 6-24 months, giving you a chance to pay down your debt without accruing large amounts of interest in the meantime.
When transferring your balance to a 0% credit card, make sure you know the fees involved, as they can impact your balance. Additionally, if you do not pay off the balance before the introductory period ends, the remaining balance will accumulate interest at a high rate, which means you will need to transfer the balance again or pay it off quickly.
Tip #2: Take out a debt consolidation loan
Another way to pay off your credit card balances more quickly is to take out a debt consolidation loan. With a debt consolidation loan, you borrow one lump sum from a lender, which you can use to pay off your credit card balances.
Debt consolidation loans often have lower interest rates than the interest rates on credit cards, which means you may be able to save money on interest charges over time. Additionally, a debt consolidation loan can simplify your payments, as you only need to make one payment each month. Use a debt consolidation loan calculator to see how much money and time you could save by using a loan to pay off your high-interest credit card debt.
Tip #3: Use a method for paying down debt faster
You can use several methods to rapidly pay down your credit card balances. One popular approach is the snowball method, where you pay off your smallest balances before moving on to more significant debts.
To begin, list all your credit card balances from the smallest to the largest. Then, focus on paying the minimum amount due on all balances, except for the smallest one, which you will pay more on than the minimum. Once that balance is paid off, you move on to the next-largest balance.
This method helps build momentum and gives you small victories that keep you motivated throughout the process. Additionally, this allows you to free up more money to pay off larger debts in the long run.
The Bottom Line
Paying off your credit card debt by paying only the minimum due can take a very long time, and you will end up paying significantly more in interest in the process.
By transferring your balance to a 0% interest credit card, taking out a debt consolidation loan, or using one of many methods for paying down debt faster, you can pay off your balances more quickly and save money on interest charges over time.
Remember, while making more than the minimum monthly payments can be challenging in the short term, it can promptly create long-term financial peace of mind.
