A £3,000 credit card balance at a typical 24.9% APR accrues £62.25 of interest in the first month. Paying £75 a month clears it in just over seven years at a cost of £3,471 in interest, more than the original debt; paying £150 a month clears it in 27 months for £916; paying £300 a month clears it in a year for £398. Paying only the card’s minimum is slower still, because the minimum shrinks as the balance falls. Fixing a payment you can afford and never letting it drop is the single most effective change most cardholders can make.
What a fixed monthly payment does to £3,000 at 24.9%
| Monthly payment | Months to clear | Total interest | Total paid |
|---|---|---|---|
| £62 | never, the balance grows | ||
| £75 | 87 | £3,471 | £6,471 |
| £100 | 48 | £1,744 | £4,744 |
| £150 | 27 | £916 | £3,916 |
| £160 | 24 | £839 | £3,839 |
| £285 | 12 | £420 | £3,420 |
| £300 | 12 | £398 | £3,398 |
The first row is the trap: 24.9% APR is about 2.07% a month, so a payment of £62 barely covers the interest and the balance never falls. Between £75 and £100 the difference is £25 a month but 39 months and £1,727 of interest. The credit card payoff calculator runs any balance, APR and payment, shows the payoff date and what an extra £25, £50 or £100 a month would save, and can work backwards from a target date to the payment needed.
Why the minimum payment is designed to be slow
Most cards set the minimum at the greater of a small fixed sum, typically £5 to £25, and a formula such as interest plus 1% of the balance, or 2% to 3% of the balance. On £3,000 at 24.9% a minimum of interest plus 1% starts at about £92 and falls every month as the balance drops, so someone paying only the minimum pays less and less and the debt lingers for decades. A card at 29.9% with a £5,000 balance on a flat 2.5% minimum, starting at £125 a month, takes 232 months to clear and costs about £23,970 in interest; fixing the payment at £250 clears it in 29 months for £2,007. Under Financial Conduct Authority rules a lender must contact a customer who has paid more in interest and charges than in capital for 18 months, and after 36 months must offer a way to repay faster, but the rules only start the conversation.
How the interest is charged
Interest is calculated daily on the outstanding balance and added at the statement date. Purchases carry no interest if the statement balance is paid in full by the due date, usually 56 days at most from the purchase, but once any balance is carried the interest-free period on new purchases is lost until the card is cleared in full. Cash withdrawals and balance transfers attract interest from day one at a higher rate, with a fee of around 3% on top. Payments are allocated to the most expensive debt first, so a cash balance is cleared before purchases. The APR on the statement is representative; the rate offered depends on credit history, and a card advertised at 24.9% can be issued at 29.9% or more.
Clearing it faster
| Approach | What it does |
|---|---|
| Fix the payment and never reduce it | Turns a decades-long minimum into a defined payoff date |
| Pay by direct debit on the due date | Avoids late fees and the loss of any promotional rate |
| Move the balance to a 0% transfer card | Stops interest for 12 to 30 months, for a fee of about 3% to 4% of the balance transferred |
| Take a personal loan to consolidate | Fixes the rate and term; rates on unsecured loans are usually far below card APRs for good credit records |
| Pay the highest APR card first | Where several cards are held, direct every spare pound at the most expensive while paying minimums on the rest |
A 0% balance transfer only helps if the card is cleared before the promotional rate ends, since the rate afterwards is usually higher than the original card’s, and new spending on the transfer card is not covered by the 0% deal. Consolidating with a loan needs the cards to be closed or left unused, or the debt reappears alongside the loan. The loan repayment calculator shows what a consolidation loan costs at any rate and term.
Protection and credit records
Purchases between £100 and £30,000 on a credit card are covered by Section 75 of the Consumer Credit Act, which makes the card provider jointly liable with the retailer if goods are faulty or not delivered, and is the main reason to use a card for large purchases even when the balance is cleared in full each month. Missed payments are recorded on the credit file for six years and affect the rate offered on a mortgage or loan; a high balance relative to the limit also lowers a credit score even where payments are on time. The savings goal calculator shows how the money freed once a card is cleared builds if redirected into savings.
Common questions
Why does my credit card balance never go down? Because a payment close to the monthly interest, about 2% of the balance at a 24.9% APR, leaves almost nothing to reduce the debt, and a minimum payment falls as the balance falls.
How long does it take to pay off £3,000 at 24.9%? About 87 months at £75 a month, 48 months at £100, 27 months at £150 and 12 months at £300.
How much interest will I pay on a credit card? At 24.9% APR roughly 2.07% of the balance each month: £62 on £3,000. Total interest depends on how fast the balance is cleared, from £398 over a year to more than the original debt over seven years.
Is it better to pay the minimum or a fixed amount? A fixed amount, always. Paying the minimum stretches a debt for decades because the minimum shrinks with the balance.
Should I use a 0% balance transfer card? Yes if the fee is less than the interest saved and the balance will be cleared before the 0% period ends. Do not spend on the transfer card.
Does paying off a credit card improve my credit score? Yes. Lower balances relative to limits and an unbroken record of on-time payments both help; closing very old accounts can lower the score slightly.
Information, not financial advice. Figures are from the site’s calculator using a representative 24.9% APR with interest compounded monthly and a fixed monthly payment; card terms, minimum payment formulas and rates vary. Anyone struggling with card debt can get free advice from StepChange, National Debtline or Citizens Advice.