Why minimum payments are designed to keep you in debt.
Credit card minimum payments in the US are remarkably low — usually 1% of your balance plus the month's interest, with a $25 floor. On a $5,000 balance, that's about $50 a month. It feels manageable. That's the point.
But run the math: at a 22% APR with a 1% minimum, that $5,000 takes nearly 20 years to pay off, and you'll pay over $8,000 in interest. The original purchase, whatever it was, will end up costing nearly three times the sticker price. The bank doesn't lose if you make minimum payments — they win, year after year.
The math behind the minimum
Every month, your credit card issuer charges interest on your balance: balance × (APR / 12). On $5,000 at 22% APR, that's about $92 in monthly interest alone. Your minimum payment is structured to cover this interest plus a tiny sliver of principal — typically 1% of the balance.
So on a $5,000 balance, your minimum might be $92 (interest) + $50 (1% of principal) = $142. Of that, only $50 actually reduces what you owe. The other $92 goes straight to the bank as profit. Next month, your balance is $4,950, your interest is $90, your principal payment is $49.50. The progress is glacial.
What an extra $50 does
The reason extra payments work so dramatically is that every dollar above the minimum goes 100% to principal. There's no split. So adding $50 a month to a $142 minimum doesn't just give you $50 more progress — it accelerates the entire payoff because future months' interest is calculated on a smaller balance.
On that same $5,000 balance, paying minimum + $50 extra cuts your payoff time from ~20 years to about 5 years, and saves you over $5,000 in interest. The same $50 a month, just applied differently, changes the entire shape of the math.
About the formula
This calculator uses the standard credit card minimum payment formula required by the CFPB and the federal CARD Act of 2009: minimum = max($25, principal_percentage × balance + monthly_interest). It matches the methodology disclosed by Chase, Citi, Capital One, and American Express. Your actual card agreement may use slightly different parameters; this is the industry standard. Real-world results assume no new charges, no late fees, and no rate changes.