A credit card lets you buy things now and pay later. This is called revolving credit because you can borrow, repay, and borrow again.

Credit cards can be useful for:

• Building credit
• Managing cash flow
• Covering emergencies

But if you borrow more than you can afford to repay, your balance can grow quickly, especially if you only make the minimum payment each month.

How credit card companies make money

If you don’t pay your full balance each month, the company charges interest. Over time, that interest adds up and makes your debt more expensive.

How making minimum payments leads to more interest

Let's say you put $3,000 on a credit card with a 20% interest rate and a minimum payment of $80.

If you only pay the minimum payment each month:

• It will take 5 years (60 months) to pay off the debt
• You’ll pay a total of $4,747
  • That’s $3,000 in purchases
  • Plus $1,747 in interest

How paying a bit more each month helps

Even small extra payments can make a big difference.

If you pay just $10 more each month:

• You’d pay off the debt 10 months sooner
• You’d save $332 in interest