Does credit card interest go down the more you pay?

Reduce Credit Card Interest by Paying More Than the Minimum

Credit cards are a convenient way to make purchases, but they can also be a source of significant debt if not managed properly. One of the biggest factors that determines how much interest you pay on credit card debt is the amount you pay each month.

Minimum Payments Keep Interest High

Many credit card companies set the minimum monthly payment at just a small percentage of your outstanding balance. While making only the minimum payment will keep your account current, it will also keep your debt balance and interest charges high.

Pay More to Reduce Interest

The key to minimizing interest charges on credit card debt is to pay more than the minimum amount due each month. By making larger payments, you reduce the amount of outstanding debt and accelerate the repayment process.

Substantial Overpayments

Substantial overpayments can significantly shorten the repayment period and minimize accrued interest. For example, if your credit card balance is $10,000 with an interest rate of 18% and you make the minimum payment of $200 per month, it will take you 95 months (nearly 8 years) to repay the debt and you will pay $7,672 in interest.

However, if you increase your monthly payment to $500, it will take you only 28 months (2 years and 4 months) to repay the debt and you will pay only $1,880 in interest.

Eliminate Interest Charges

Ideally, you should avoid carrying a balance on your credit card altogether. If you can pay off your balance in full each month, you will eliminate interest charges entirely. This is especially important if you have a high-interest credit card.

Conclusion

By paying more than the minimum amount due on your credit card each month, you can significantly reduce interest charges and accelerate debt reduction. Substantial overpayments can shorten the repayment period even further. And if possible, you should aim to pay off your credit card balance in full each month to avoid interest charges altogether.