If you pay the minimum on your credit card most months, you might be surprised at how much faster paying another $10 each month could help you get out of debt. It may not seem like a lot, but paying more than the minimum on credit cards means that you'll owe less in total interest charges in the future. Here's how it works.
Paying just $10 more than your minimum credit card payment could lead to long-term savings.
The monthly total minimum credit card payment for a Bank of America credit card is 1% of your current balance plus interest charges and any late fees for the month. Let’s look at an example that uses a credit card balance of $1,500 and an APR of 18% to illustrate how increasing your monthly credit card payment to $10 above the total minimum due could save you time and money.
The potential savings: By paying $10 more than you would if you pay the minimum on your credit card, and keeping up that fixed payment amount until the debt is fully repaid, you could save $1,202.41 in interest payments and pay off your debt 115 months sooner—that's almost 10 years sooner.
Understanding how paying even a little more than the total minimum credit card payment could save you a lot of time and money may help motivate you to increase your payments. The reward will be the satisfaction you get from retiring your credit card debt faster (and the extra savings, of course). To find out for yourself how much you could save by paying more than the total minimum, try our credit card payment calculator.