Question 1

How is credit card interest calculated?

Accepted Answer

Credit card interest is typically charged at 2-4% per month (24-48% per annum) on the outstanding balance. Interest is compounded monthly on the unpaid balance after the due date, making it one of the most expensive forms of debt.

Question 2

What is the minimum payment trap?

Accepted Answer

Paying only the minimum due (usually 5% of outstanding) keeps your account in good standing but barely covers the interest. This means the principal hardly reduces, and you end up paying many times the original amount over years. Always pay more than the minimum.

Question 3

How can I pay off credit card debt faster?

Accepted Answer

Pay as much as possible above the minimum each month. Consider balance transfer to a lower-rate card, consolidate with a personal loan at lower interest, or use the avalanche method (pay highest-rate card first) to minimize total interest.

Financial Calculators