Credit Card Interest Explained (and How to Beat It)

How APR turns into monthly interest, why minimum payments keep you in debt, and when a balance transfer helps.

Credit card interest feels small each month, but it compounds against you.

From APR to monthly interest

A card with a 22% APR charges about 1.83% a month. On a $5,000 balance that is roughly $92 of interest in the first month alone.

Why minimum payments trap you

Minimums are often little more than the interest. Paying a fixed $200 a month on that $5,000 balance clears it in about 34 months and costs roughly $1,750 in interest. Paying only the minimum can take many years.

Ways out

• Pay a fixed amount every month, even when the minimum falls.
• Balance transfer to a 0% offer, but count the transfer fee (often 3% to 5%) and pay it off before the offer ends.
• Pay the highest rate first if you have several cards.

Run it

See your payoff date in the credit card payoff calculator, test an offer in the balance transfer calculator, or plan several debts in the debt payoff planner.

This article is general education, not financial advice.