# TIL: One Of The Most Effectives Way To Pay Off Debt

TODAY I LEARNED that…

If you can afford the minimum payment this month for your credit card debt, make the same payment next month. Do not default to the new minimum payment.

• a \$5,000 balance on a credit card
• with a 20% interest rate, then
• paying JUST the minimum (let’s say 3% of the balance, which is \$150 for the first payment),
• it would take 183 months (that’s 14 YEARS) to pay off the card, and you’d pay \$5,601.51 in interest alone.

This is because the Minimum Payment goes downs as the Balance goes down. THIS IS WHAT THE BANKS ARE HOPING YOU WILL DO!!

So after making the first payment of \$150, your next minimum payment is \$148, then \$146 in Month 3, etc.

BUT, if you just keep a constant payment of \$150, you’ll pay off the card in 48 months and spend \$2,164 in interest.

This will shave over 11 years off the time it takes to repay the card, and save you \$3,437.51 in interest.

Paying even a small amount over the minimum payment each month goes a long way.

More examples:

Paying \$175/month (\$25 extra) cuts your payments down to 39 months and saves you \$3,914.51 in interest.

Paying \$200/month (\$50 extra) cuts your payments down to 32 months and saves you \$4,226.51 in interest.

I know you hear this time and again here in PF, but paying the Minimum Payments is a Lifetime Debt Sentence.

And paying extra each month gives you an emotional “win” that will help you keep moving forward.

Source: Reddit