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AfriTaxCalc

Why Minimum Payments Take So Long

2 min read2026 tax year, USD

A credit card's minimum payment feels manageable because it's small. The catch is that it's usually a percentage of the balance, so it shrinks as the balance shrinks, and the card takes years to clear.

An example

Take a card with a balance of US$1,000 at 24% a year, which is 2% a month. Suppose the minimum payment is 5% of the balance, but at least US$10. (Your bank sets its own minimum: check your card's terms.)

  • In the first month, US$20.00 of interest is added, and the minimum is 5% of US$1,020: US$51.00.
  • As the balance falls, so does the payment: at a balance of US$500 it's about US$25.
  • Once the 5% drops below US$10, you pay US$10 a month until the card is clear.

Paying only the minimum, with no new spending, takes 77 months, more than six years, and costs US$573.97 of interest: over half of what you originally owed.

A fixed payment

Now pay a fixed US$100 every month instead. The card clears in 12 months, with US$127.04 of interest. The extra you pay early on goes straight to the balance, so less interest is charged every month after.

Even US$50 a month more than the minimum makes a large difference. Our credit card repayment calculator shows the time and interest for any payment you choose, in US dollars or ZiG, and the payment that would clear the card within a year.

A payment that never clears it

If your payment doesn't cover the interest added each month, the balance never goes down. On US$1,000 at 24%, US$15 a month is less than the first month's US$20 of interest, so the debt grows. The calculator warns you when that happens.

Making it work

  • Choose a fixed amount you can keep paying, and set it up as a standing order so it goes out every month.
  • Stop using the card while you clear it: the calculator assumes no new spending.
  • If you have more than one debt, pay the minimum on all of them and put anything extra towards the one with the highest rate.
  • Ask your bank how its minimum payment is worked out and what fees it charges. Fees count too: Zimbabwe's Moneylending and Rates of Interest Act treats charges for credit as interest.

Sources

This is general information, not tax, legal or financial advice.