Minimum payments on credit cards are designed to keep you paying interest for years. Here's exactly how much a credit card balance costs you, and how to calculate your real payoff date.
Credit card companies are required by law to tell you how long it will take to pay off your balance if you only make minimum payments. That number is often shocking — and it reveals exactly how the business model works.
Credit card APR (Annual Percentage Rate) is applied monthly to your outstanding balance. Most UK cards charge 20–30% APR. Here's how the daily interest accumulates:
When you make a minimum payment, a large portion goes to interest first. Only the remainder reduces your actual balance (the principal).
Most credit cards set the minimum payment at 1–3% of the balance or £25, whichever is greater. This sounds manageable — but the consequences of only paying the minimum are severe.
That £2,000 balance at 24% APR paid at minimum payments will cost you roughly £3,600 in interest on top of the original debt — meaning you'll pay nearly £5,600 in total for £2,000 worth of purchases.
The difference between minimum payments and a fixed slightly-higher payment is dramatic:
Paying £100/month instead of minimum payments saves over £3,100 in interest and eliminates the debt 13 years faster. That's an enormous difference for a relatively small increase in monthly outgoing.
If you have multiple credit card balances, there are two main payoff strategies:
Avalanche (mathematically optimal): Pay minimums on all cards, put every extra pound toward the highest-interest card first. This minimises total interest paid.
Snowball (psychologically easier): Pay minimums on all cards, put every extra pound toward the smallest balance first. You eliminate cards faster and get motivational wins sooner.
Research consistently shows the avalanche saves more money; the snowball leads to better adherence for people who struggle to stay motivated. The best method is the one you'll actually stick to.
A 0% balance transfer card lets you move existing debt and pay no interest for a promotional period (typically 12–30 months). There's usually a transfer fee of 1–3% of the amount moved.
The critical discipline: you must pay off the full balance before the 0% period ends. If you don't, the remaining balance is charged at the card's standard rate (often 20–29%), frequently wiping out the benefit entirely.
The simplest credit card strategy: never carry a balance. Use the card for the purchase protection, cashback, or points — then pay the full statement balance every month by direct debit. You pay zero interest, keep your credit score healthy, and potentially earn rewards on spending you'd make anyway.