The Minimum Payment Is Designed to Last
A typical minimum is 1–3% of the balance or a floor of $25–$35, whichever is larger. Because it falls as the balance falls, the payoff stretches out enormously. On $6,500 at 24.99% with a 2% minimum, the balance takes about 19 years to clear and the interest comes to $11,948 — nearly twice what was borrowed.
This is not an accident of arithmetic. The minimum is set so that the account remains profitable for as long as possible while staying within regulatory limits.
Credit Card Payoff Chart
$6,500 at 24.99% APR:
| Monthly payment | Months to clear | Total interest | Total repaid |
|---|---|---|---|
| $150 | 113 | $10,436 | $16,936 |
| $200 | 55 | $4,461 | $10,961 |
| $250 | 38 | $2,957 | $9,457 |
| $300 | 30 | $2,234 | $8,734 |
| $400 | 21 | $1,517 | $8,017 |
| $500 | 16 | $1,160 | $7,660 |
Doubling the payment from $150 to $300 does not halve the time — it cuts it by nearly three-quarters and saves $8,202, because far less of each payment is consumed by interest.
Interest Compounds Daily
Card interest is calculated on the average daily balance using a daily periodic rate of APR/365, then compounded. A 24.99% APR therefore produces an effective annual rate closer to 28.4% on a carried balance. This is also why paying mid-cycle rather than on the due date reduces interest — it lowers the average daily balance.
The Grace Period
Pay the statement balance in full by the due date and you pay no interest on purchases at all. Carry any balance and the grace period disappears — new purchases start accruing interest immediately, from the transaction date, until the balance is cleared in full for a full cycle. This is the single most misunderstood mechanic of credit cards.
Cash advances never have a grace period and typically carry a higher rate plus an upfront fee.
Balance Transfers
A 0% promotional transfer costs 3–5% upfront and buys 12–21 months of interest-free repayment. On $6,500 at 24.99%, a 3% fee of $195 against roughly $1,400 of first-year interest is an obvious win — provided the balance is actually cleared before the promotion ends, and no new purchases are added to the card.
Frequently Asked Questions
Does carrying a balance help my credit score?
No. This is a persistent myth. Utilisation is reported from the statement balance, and paying in full each month reports the same activity without any interest cost.
Should I close a paid-off card?
Usually not. Closing it removes its credit limit, raising your utilisation ratio, and eventually shortens average account age. Keeping it open with occasional small use is generally better.
Can I negotiate my APR?
Frequently, yes. A call citing a good payment history and competing offers succeeds more often than people expect, particularly on accounts held for several years.