How Much Would a $5,000 Credit Card Balance Cost if You Only Paid the Minimum?

Credit cards can be a great way to buy things. Unlike when you pay out of your checking account, you can get all kinds of perks for using a credit card -- such as extended warranties and rewards that give you points, miles, or cash back.

What you don't want to do, though, is carry a balance on your credit card. You'll want to pay the card off in full when your statement is due so you don't get stuck paying credit card interest. Otherwise, you could find yourself spending an absolute fortune.

Say, for example, you had a $5,000 balance on your card. How much exactly would this cost you if you only made the minimum payment?

Making only the minimum payment is expensive

If you owed $5,000 on your credit card at the average interest rate of 21.19% (as of August 2023), and you made a minimum payment of 2% of your card's balance, it would take you 878 months (more than 73 years) to pay off your debt. And during that time period, you would pay a shocking total of $30,797.65 in interest.

You may be wondering how it is possible that this could happen. How could you end up in debt for 73 years and spend more than six times the amount you initially charged? It's very simple: Your minimum payment would almost entirely go toward covering the financing charges that you owe to your creditor.

Your first payment on your $5,000 balance, for example, would be for $100.00. Of that amount, $87.50 would go to interest and just $12.50 would go to actually lowering the balance outstanding on your debt.

You would bring down your balance so slowly that it would take you many decades to actually end up owing nothing. And with such a high interest rate, you would be paying your credit card company tons of money out of your bank account without making much progress.

How to deal with your expensive credit card debt

Obviously, it is not sustainable to get stuck paying a credit card balance for 73 years. You don't want to be paying off today's purchases as a retiree. So, you'll need to either:

• Pay more than the minimums
• Refinance your debt

Ideally, you'll consider doing both of those things. If you can refinance to a personal loan, you may be able to drop your interest rate dramatically. Plus a debt consolidation loan would come with a fixed repayment schedule so you'd become debt-free in a few years. You would have higher monthly payments, but save a fortune over time.

You could also explore options such as moving money to a balance transfer card. This would allow you to reduce your rate to 0% on the transferred balance for a limited period of time (although you'd usually have to pay an upfront balance transfer fee of 3% or 5%).

Paying more than the minimum on your current card could also help, although the high rate credit cards come with is always going to make paying off a balance more difficult if you can't refinance. Still, any extra you can pay will bring that balance down much faster since it will all go toward your principal balance instead of being applied to interest owed (and leaving you with nothing to show for it). So it's worth making the effort to pay more than the minimum due.