Guide · Debt
Credit Card Debt: How Long Will It Take to Pay Off?
Credit cards are one of the most expensive ways to borrow money in the UK. Understanding how interest compounds daily — and why minimum payments are a trap — is the first step to getting free of them.
How credit card interest compounds daily
Unlike personal loans where interest is calculated on the original balance, credit card interest is charged daily on whatever you currently owe. The daily rate is simply the APR divided by 365. At 22.9% APR, that is 0.0627% per day — small sounding, but relentless.
If you carry a balance from month to month, interest is added to what you owe, and the following month's interest is calculated on the higher total. This compounding effect means a £3,000 balance grows quickly if you only make the minimum payment. New purchases also start accruing interest from the transaction date when you carry a balance — unlike when you pay in full each month and benefit from the interest-free grace period.
The minimum payment trap: £3,000 at 22.9% APR
Minimum payments are typically set at around 1–2% of the outstanding balance or a floor of £25. Because the minimum falls as the balance falls, you barely dent the principal in the early months. The table below shows how dramatically your choice of monthly payment changes the total cost.
| Monthly payment | Months to clear | Total interest | Total repaid |
|---|---|---|---|
| Minimum (~£46 initially) | 327 months (27+ years) | £4,240 | £7,240 |
| £100 | 40 months | £927 | £3,927 |
| £150 | 24 months | £579 | £3,579 |
| £200 | 17 months | £394 | £3,394 |
Paying £200 per month instead of the minimum clears the debt in 17 months and saves over £3,800 in interest.
0% balance transfers: a powerful tool with conditions
If you have a good credit score, a 0% balance transfer card lets you move your existing balance to a new card that charges no interest for a set promotional period — often 18 to 30 months. You pay a one-off transfer fee of typically 2–4% of the balance. On £3,000 that is £60–£120 upfront, but you save far more in interest.
The key discipline: divide the balance by the number of 0% months and pay at least that amount each month. If £3,000 is moved to a 24-month 0% card, you need to pay £125 per month to clear it before interest kicks in. Do not use the card for new spending — new purchases typically accrue interest at the standard rate immediately. Set a calendar reminder two months before the promotional period ends so you can act if there is still a balance remaining.
Tackling multiple cards: the avalanche method
If you have balances on several cards, pay the minimum on all of them to avoid penalty charges, then direct every available extra pound at the card with the highest APR. This is called the avalanche method and minimises the total interest you pay across all debts.
Once the highest-rate card is cleared, roll its entire payment (minimum plus extra) onto the next highest-rate card. This snowballing of payments accelerates the payoff considerably. If you find the avalanche method demotivating because the highest-rate card also has the largest balance, consider the snowball method — clearing the smallest balance first to build momentum — though you will pay more interest overall.
Frequently asked questions
How is credit card interest calculated?
Credit card interest compounds daily. The daily rate is your APR divided by 365. Each day, interest is charged on the full outstanding balance including any interest already added. This daily compounding means the effective annual cost is marginally higher than the headline APR. Interest is typically applied to your account once a month, but calculated daily from the transaction date if you carry a balance.
Is it better to pay more than the minimum?
Yes — significantly so. Minimum payments are typically set at around 1–2% of the outstanding balance or £25, whichever is greater. Because the minimum falls as the balance falls, you barely reduce the principal in early months and pay enormous amounts of interest over time. Even an extra £50 per month on top of the minimum can cut years off the repayment and save hundreds in interest.
What is a balance transfer and is it worth it?
A 0% balance transfer card lets you move existing credit card debt to a new card that charges no interest for a promotional period — typically 12 to 30 months. You usually pay a one-off transfer fee of 2–4% of the balance. If you can clear the debt within the 0% window, it is almost always worth it. The risk is that if you don't clear it in time, any remaining balance reverts to the card's standard rate, often 20%+.
Should I pay off credit cards before saving?
Generally yes, unless your employer matches pension contributions. Credit card APRs of 20–30% are far higher than any savings rate you can reliably earn. Paying off a card at 22.9% APR gives you a guaranteed 22.9% return — better than any ISA or savings account. The exception is a small emergency fund: aim for £500–£1,000 in accessible savings before aggressively paying down debt, so you do not need to reach for the card again in a crisis.