How to pay off credit card debt
With APRs of 20% to 30%, credit cards are among the most expensive debt there is. Getting out doesn't require tricks: it requires understanding how interest accrues and attacking with a fixed plan.
Why the minimum doesn't work
The minimum payment is designed to cover the month's interest plus a small slice of principal. On a $3,500 balance at 24.99%, the first month's interest is about $73 — an $85 minimum only reduces the debt by $12.
At that pace the debt takes decades, and total interest can exceed the original balance.
Avalanche or snowball
Avalanche: order your debts by APR and attack the most expensive first while paying minimums on the rest. It's the mathematically optimal route.
Snowball: attack the smallest balance first to eliminate it fast and build momentum. It costs slightly more in interest, but many people sustain it better.
Either one beats paying minimums by a mile. Pick the one you can keep up.
A fixed payment changes the game
Instead of the shrinking minimum, set an amount and pay it every month. Every dollar above the interest goes straight to principal, and the effect compounds month over month.
Raising the payment from $150 to $250 on a $3,500 balance at 24.99% cuts the payoff from about 33 months to 17 and saves more than half the interest.
Put a date on it
The credit card payoff calculator tells you how many months your current payment takes, the total interest, and the payment needed to be done by the date you choose. Seeing it on a chart makes the goal concrete.
And when you hit zero: redirect that same monthly payment into savings. You've already built the habit.
Why the minimum payment is built to last
The minimum is calculated as a small percentage of the balance, so it falls as the balance falls. That stretches the debt out in time precisely when it looks like you are making progress.
Paying a fixed amount above the minimum changes the curve entirely: because the payment doesn't shrink with the balance, a larger share attacks principal every month. The gap between paying the minimum and the minimum plus twenty dollars is usually measured in years, not months.
Avalanche or snowball: which one to use
With several cards there are two strategies. The avalanche attacks the highest interest rate first and costs the least money overall. The snowball attacks the smallest balance first and is the one more people manage to sustain.
Mathematically the avalanche wins; in practice the one you finish wins. If months without visible progress are making you give up, clearing a small card first has real value the spreadsheet doesn't measure.