The Monthly Cycle
New Balance = (Old Balance × (1 + APR/12)) − Payment
Common Mistakes
- Only paying the minimum — this can take decades and cost multiples of your original balance.
- Not accounting for new purchases — every new charge resets the clock and adds to the interest-bearing balance.
- Ignoring the avalanche vs. snowball tradeoff — paying off highest-interest cards first (avalanche) saves the most money mathematically, even if paying off smallest balances first (snowball) feels more motivating.
Quick Reference
Doubling your monthly payment on a credit card typically cuts payoff time by more than half and can save 60-70% of total interest, since less balance means less interest compounding each month.
Frequently Asked Questions
Why is credit card interest so much higher than other loans?
Credit cards are unsecured debt — there's no collateral backing the loan, so lenders charge higher rates to offset the higher risk of default compared to secured loans like mortgages or auto loans.
Does a balance transfer help?
A 0% introductory APR balance transfer can dramatically speed up payoff if you clear the balance before the promotional period ends — but watch for transfer fees and the rate that kicks in afterward.
