Understanding Credit Card Interest
Credit card interest accrues daily. Your daily periodic rate is your APR divided by 365 (or 360 — cards vary). On a £3,500 balance at 22.9% APR, interest accrues at roughly £2.20 per day. Paying only the minimum — often 1–2% of the balance — means most of your payment covers interest rather than principal, stretching repayment over many years.
Why Minimum Payments Are a Trap
If the minimum payment is set at 2% of the balance and you have £3,500 at 22.9% APR, your first minimum payment is approximately £70. At that rate, it can take over 25 years to clear the balance and cost more than the original debt in interest. A fixed payment of £150 per month cuts that to under 3 years — a dramatic difference.
The Impact of Extra Payments
Even £20–£30 extra per month can reduce payoff time by months and save significant interest. Apply any bonus, tax refund, or windfall directly to your credit card balance to eliminate future interest on that amount immediately.
Balance Transfers
If you have good credit, a 0% balance transfer card can let you pause interest for an introductory period, directing every payment to reducing principal. Check our Balance Transfer Calculator to model fees and compare deals.