The Cost of Carrying a Credit Card Balance

How much in interest charges does a credit card balance accumulate over the years?  This can be illustrated using  the following assumptions:  (1)  The current balance due on a credit card is $3,000;  (2)  the card will not be used any longer; and (3) a monthly payment of exactly $100 will be made each month until the balance is paid off.
APR
Total Interest Paid     # of Monthly Payments
$960
$881
$806
$735
$666
$602
$540
$480
$423
40 (3 years, 4 months)
39 (3 years, 3 months)
39 (3 years, 3 months)
38 (3 years, 2 months)
37 (3 years, 1 month)
37 (3 years, 1 month)
36 (3 years)
35 (2 years, 11 months)
35 (2 years, 10 months)
As the above table illustrates, a person with a 9% APR credit card will pay less than half the interest rate than a person with a 17% card.  Naturally, increasing the monthly payment will result in less interest charges and a quicker pay-off; however, paying only the minimum required payment each month will significantly increase the amount of interest and pay-off period.  How much? The table below uses the same terms given above, except the monthly payment has been reduced to $50. Notice the increase in pay-off time and interest:
APR
Total Interest Paid     # of Monthly Payments
$3,789
$3,115
$2,613
$2,219
$1,897
$1,626
$1,395
$1,193
$1,015
136 (11 years, 4 months)
123 (10 years, 3 months)
113 (9 years, 5 months)
105 (8 years, 9 months)
98 (8 years, 2 months)
93 (7 years, 9 months)
88 (7 years, 4 months)
84 (7 years)
81 (6 years, 9 months)
17%
16%
15%
14%
13%
12%
11%
10%
09%
17%
16%
15%
14%
13%
12%
11%
10%
09%
Pay off your credit card debt as quickly as possible.  Give up purchases you don't need so that you have an extra $20, $30, $40 or more to pay towards your credit card debt each month.  Visit our budgeting section for tips on saving money. 

Use our credit card calculators to develop a credit card payoff plan:
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