Topic 4 · Loans · Lesson 4.4

Credit Card Trap

Set the starting balance and the APR. Watch three payment strategies — minimum only, double the minimum, and a custom dollar amount — race to pay off the debt. The minimum-only curve flattens out for decades. Doubling the payment changes the entire shape. The picture is the whole lesson.

Credit card payoff math · monthly compounding

interest = balance × (r/12) · new = balance + interest − payment

A $5,000 balance at 22% APR: paying only the minimum takes 26 years and costs $5,872 in interest. Paying $200/month cuts that to 2.5 years and $1,498.

Minimum only

26.2 years

$5,872 total interest

Double the minimum

7.8 years

$3,167 total interest

Custom ($200/month)

2.5 years

$1,498 total interest

Minimum payment only Double the minimum Custom $/month

Starting balance $5,000

$500$20,000

APR 22.0%

5%30%

Custom payment $200/month

$25$1,000

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