The High Cost of Minimum Payments
Credit cards often carry high interest rates (APR), ranging from 15% to 29%. Because interest compounds daily, making only the minimum payment can keep you in debt for decades.
By increasing your monthly payment even slightly above the minimum, you drastically reduce the Principal balance, which lowers the interest charged the following month.
Avalanche vs. Snowball Method
Once you know your payoff date, you can choose a strategy:
- Avalanche: Pay off the card with the highest Interest Rate first (saves the most money).
- Snowball: Pay off the card with the lowest Balance first (builds psychological momentum).