Credit cards in the UK typically charge interest using an Annual Percentage Rate (APR). Unlike a standard personal loan where your payments are fixed, credit card interest compounds, meaning you are charged interest not just on your purchases, but on the interest that has already been added to your account.

Because credit card minimum payments are usually set very low (often just 1% to 2.5% of your balance plus interest), paying only the minimum means the majority of your payment goes toward interest, leaving the actual debt (the principal) largely untouched.

Example 1: The Minimum Payment Trap

If you have a £3,000 balance on a card with a 21.9% APR, and you only pay a small fixed amount of £60 a month:

– It will take you 100 months (over 8 years) to clear the debt.
– You will pay roughly £2,985 in interest, almost doubling the original cost of your purchases.

Takeaway: Relying on low payments keeps you in debt longer and dramatically increases the total cost.

Example 2: Setting a Target Payoff Timeframe

Instead of paying £60 a month, imagine you decide you want to clear that same £3,000 balance in exactly 24 months (2 years).

– Using the ‘Desired months to pay off’ feature, the calculator shows you need to pay £155.45 per month.
– By increasing your monthly payment, you clear the debt 6 years faster and only pay roughly £730 in interest, saving you over £2,200 compared to the first example.