Lesson 1 of 5

Why minimum payments keep you in debt longer than you think

Credit card minimum payments are typically set at 1-3% of your balance, which sounds small and manageable -- and that's the point. On a $5,000 balance at 22% APR with a 2% minimum payment, paying only the minimum every month takes over 20 years to pay off and costs more in interest than the original balance itself. The math works against you because as you pay down the balance, the minimum payment shrinks too, which stretches the payoff even further. It's not a fixed amount decreasing steadily -- it's a shrinking target that interest keeps pace with. This isn't a case for panic; it's a case for intention. Even a fixed extra amount every month -- $50, $100, whatever you can commit to consistently -- breaks that cycle, because it doesn't shrink as the balance does. The next two lessons cover how to decide which debt to target first, and how to see your actual payoff date instead of an open-ended "eventually."