Credit Card Debt

Get Out Of Debt

Have you ever wondered how long it might take to pay off your debt? Especially if that debt is credit card debt? You are probably aware that credit cards are notorious for being difficult to pay off, so I thought I would work out just how long it takes to pay your credit cards off if you only make the minimum payments each month. A lot of people do this, and I can tell you, it is a very expensive way to purchase anything.

Suppose, for the sake of example, you have a simple $1,000 credit card debt. Suppose your interest rate is 14% and you make the minimum payment each month. How long would it take to pay that off?

Are you ready? The answer is an incredible 19 years and 8 months! You would also pay $1,123.41 in interest on top of the original $1,000 debt, so whatever you bought on the credit card would be costing you more than double the original price...

You might not be lucky enough to have such a “reasonable” interest rate, of course. If your interest rate is, say, 20%, then by making the minimum payments only on your credit card, your measly $1,000 debt would take you a truly astounding 40 years and 3 months to clear. Oh, and you’d have to pay $3,622.71 in interest, or, including the original $1,000, over four and a half times the original price of whatever you paid for.

In times of high inflation and economic crisis and ineptitude, interest rates can go higher still, of course. If your rate is just 24%, then it would take you an impossible 315 years to pay off this tiny debt. Your interest payments, in theory anyway, would come to $38,752.57 - not that you’d have to pay this unless you lived so long, of course!

I hope these numbers make it clear that when you buy anything with a credit card and only make the minimum payments, you are paying at least twice over for whatever you purchased: no wonder so many people don’t have any money!

What can you do? Well, there are different techniques for paying off debts, of course, but the simplest one when it comes to credit cards is to always pay more than the minimum payment each month, on at least one of your credit cards (and preferably on all of them).

This table shows the figures if you make the minimum payment plus $10 each month.

Interest Rate Time to pay back (min payments only) Time to pay back (min plus $10) Amount of Interest Saved
14% 19y 8m 5y 8m $763.10
20% 40y 3m 6y 8m $2,983.72
24% 315y 0m 7y 8m $37,841.47

As you can see, paying just $10 extra a month dramatically reduces the length of time it takes to pay off the credit card, and cuts the overall cost enormously as well. Now, strictly, these figures are approximate, since each bank calculates the figures in their own way: some will allow you to pay off the cards sooner as they set a larger minimum payment (usually, 2% of the balance or higher). The ones given here are based on a more painful formula similar to that used by some card issuers.

The Federal Reserve has a credit card calculator based on the 2% minimum payment formula sometimes used in the USA. has a credit card calculator based on the worst case formula, often used in the UK and elsewhere. I have also written a free e-book about the whole subject of paying off impossible debts, in case you’re interested.