How a $1,000 Credit Card Bill Can Take 4 Years to Pay Off

Many people get into credit card debt over the holidays. But regardless of the reason, one of the best things you can do is pay it off. Ideally you want to put as much as you can toward the balance to clear the debt faster. You also want to avoid paying interest.

Making minimum payments on your balance can be tempting, but tends to take years to clear out a debt. To prove this, we used Credit.com’s credit card payoff calculator. Let’s say you have $1,000 on a card with a 15% APR. A minimum payment might be $25 a month, which you’d be paying well into the next decade. Specifically, it would take four years and eight months — that’s 56 payments — to pay off a balance of $1,000. Besides dragging out the debt for years, you’d end up paying $395 in interest by the time you made your last payment on August 2020.

Another thing to consider is how taking years to pay a small balance might affect your credit. If you keep spending while making small payments, you’re likely to reach your credit limit, and how much of your available credit you use — i.e., credit utilization — is one of the biggest factors in credit scoring. (To see how such debt might affect your credit, you can get two free credit scores every 30 days on Credit.com.)

You’d be surprised how much increasing those monthly payments will end your debt quicker. Say you paid $35 on your credit card balance instead of $25. You’d be done in three years — by December 2018 — and only have to pay $245 in interest. That’s still a long time to be paying off debt, but now you see how a budget adjustment can ramp up the process.

If you have credit card debt, don’t panic — just make a plan to get out of it. Avoid adding to it and figure out how much you can pay each month to get your balance to $0. (The credit card payoff calculator can help.) If you’re in a tough spot, do your best to keep making payments even if they’re small. Your credit score will appreciate it.