Credit Card Pay-Off: Minimum Payments vs Fixed Payments
Minimum payments keep accounts current — but can keep you in debt for years. Switching to a fixed monthly amount (or snowballing) slashes time and interest. Here’s how it works, with examples you can test in CalcFlow.
1) How Minimum Payments Are Calculated
Most UK cards set the minimum as the higher of a small percentage of the balance (e.g. 2%–3%) or a fixed amount (e.g. £5–£25), sometimes plus any interest and fees. As the balance falls, so does the minimum — which is why progress can feel painfully slow.
2) Fixed Payments Beat Minimums
Paying a fixed amount each month (even a modest one) massively cuts the payoff time and total interest. Unlike minimums, your payment doesn’t shrink as the balance falls — so more goes to principal every month.
Example
Balance: £3,000 at APR 24.9%.
- Minimums only (3% or £5): could take 10+ years and cost £2,000+ in interest.
- Fixed £120 / month: clears in ~32 months with ~£1,000 interest.
- Fixed £180 / month: clears in ~20 months with ~£650 interest.
Figures are illustrative; exact results depend on issuer rules and compounding. Use a payoff calculator for precision.
3) Strategies That Work
- Debt snowball: Pay minimums on all, throw extra at the smallest balance. Quick wins keep you motivated.
- Debt avalanche: Pay minimums on all, throw extra at the highest APR. Mathematically optimal.
- 0% balance transfer: Move debt to 0% for 12–24 months (fees apply). Divide balance by promo months and pay that fixed amount.
- Round up + automate: Round your fixed payment up to a neat number (e.g. £175) and set a direct debit the day after payday.
4) Avoid These Pitfalls
- Only paying the minimum: Debt drags on, costs explode.
- Spending while repaying: Cancels progress — consider a cooling-off period for new card spend.
- Missing a payment: Loses promotional rates and hurts credit score.
5) Worked Payoff Comparison
| Plan | Monthly Payment | Months to Clear | Approx. Interest |
|---|---|---|---|
| Minimums (3% or £5) | Starts ~£90, declines | > 120 months | > £2,000 |
| Fixed plan | £120 | ~32 months | ~ £1,000 |
| Avalanche | £180 | ~20 months | ~ £650 |
| 0% BT (24m, 3% fee) | £125 | 24 months | ~ £90 fee |
6) Key Takeaways
- Minimums are designed to be low, not fast — fix a monthly amount instead.
- Snowball for motivation, avalanche for maths — both beat minimums.
- Consider 0% balance transfers, but plan the payment to clear within the promo.
- Use CalcFlow’s tools to compare scenarios with your numbers.