How credit card interest works
Card issuers quote an annual percentage rate (APR), but interest is charged every month on the balance you carry: the monthly rate is APR ÷ 12. With a 22% APR, a $5,000 balance costs about $92 in interest in the first month. Whatever you pay above that reduces the debt.
Example: $5,000 at 22% APR
- Paying $200 a month: debt-free in 34 months, with about $1,750 in interest.
- Paying $300 a month: 21 months and about $1,020 in interest.
- Paying $100 a month: 137 months (over 11 years) and about $8,680 in interest.
- Paying only the minimum (interest plus 1% of the balance, at least $25): about 19 years and nearly $8,000 in interest.
How to pay off credit card debt faster
- Pay more than the minimum, even a little: the extra goes straight to the principal.
- Avalanche method: pay minimums on every card and put the rest on the card with the highest APR. This costs the least interest.
- Snowball method: clear the smallest balance first for quick wins, then roll that payment into the next card.
- 0% balance transfer cards can pause interest for 12–21 months, usually for a 3–5% fee. Have a plan to clear the balance before the promo ends.
- Stop adding new purchases to the card while you pay it down.
Frequently asked questions
How long will it take to pay off $5,000 on a credit card?
At 22% APR, paying $200 a month takes 34 months and costs about $1,750 in interest. Paying $300 a month cuts it to 21 months and about $1,020.
Why does my balance barely go down?
Most of a small payment goes to interest. At 22% APR, a $5,000 balance accrues about $92 of interest each month, so a $100 payment only reduces the debt by about $8 in the first month.
What happens if I only pay the minimum?
It can take well over a decade and cost more in interest than the original balance. US minimums are often interest plus 1% of the balance.
Is it better to pay off the highest interest or the smallest balance first?
Paying the highest-rate card first (avalanche) saves the most money. Paying the smallest balance first (snowball) can be more motivating. Either works if you stick with it.
Assumes a fixed interest rate, no new purchases, no fees and payments made on time. Your card's terms may differ.