By Paul Feeney, Founder and Chief Executive Officer, Otivo

That credit card balance might not look too frightening, but paying only the minimum could keep you in debt for years. Here's how to take control, pay less interest and get your money working for you again.

You check your credit card statement. You've made your repayment, haven't bought anything particularly extravagant, and yet the balance has barely moved. Another month, another payment, and somehow you're still almost exactly where you started.

Sound familiar?

It's one of the most frustrating things about credit card debt. You can do what the bank asks, make every minimum repayment on time and still find yourself paying off the same purchases years later. Meanwhile, interest quietly adds to the cost of things you bought months, or even years, ago.

But here's the good news. You don't necessarily need a huge salary or a sudden windfall to start making progress. Often, the difference between staying in debt and getting out of it comes down to understanding how interest works, changing the way you make repayments and having a plan you can stick to.

Let's look at how to make that happen.

The minimum repayment trap

Imagine you owe $5,000 on a credit card charging 20% interest a year.

At that rate, the interest alone is roughly $83 in the first month, assuming the balance stays around $5,000. That's before you've made any progress towards clearing what you originally borrowed.

Now imagine your minimum repayment is $100.

You might think you've knocked $100 off your debt. But after accounting for approximately $83 in interest, you've only reduced the balance by around $17.

That's the problem.

Minimum repayments are generally calculated as a small percentage of your outstanding balance or a fixed dollar amount, whichever is greater. The exact rules depend on your card.

As your balance falls, your minimum repayment may fall too. That means you can keep making the required payments without making much progress towards becoming debt-free.

And the longer the debt hangs around, the more interest you can end up paying.

The minimum repayment is designed to meet your monthly obligation. It isn't necessarily designed to get you out of debt quickly.

1. Pay more than the minimum, even if it's only a little

The single biggest change you can make is to stop treating the minimum repayment as your target.

Think of it as the starting line.

Every extra dollar you put towards your credit card reduces the outstanding balance. And because interest is generally calculated on what you owe each day, a lower balance means less interest building up.

That creates a useful cycle. Less interest means more of your next repayment can go towards clearing the debt itself.

Consider our $5,000 credit card balance at 20% interest.

If you paid a fixed $150 every month, you could clear the balance in approximately four years, paying around $2,200 in interest.

Increase that repayment to $250 a month and you could be debt-free in around two years, with interest falling to roughly $1,000.

That's a difference of approximately two years and more than $1,000 in interest, simply by increasing your monthly repayment.

These are illustrative estimates assuming a constant 20% annual interest rate, monthly interest calculations, no fees and no new purchases. Actual results depend on your card's terms and how interest is calculated.

Of course, an extra $100 a month isn't realistic for everyone. The important thing is to find an amount you can afford consistently, without leaving yourself short of money for essentials.

And if you receive a tax refund, a bonus or another unexpected payment, putting some of it towards your card could help you get ahead even faster.

2. Stop adding to the balance you're trying to clear

Here's an uncomfortable truth about paying off credit card debt.

It's difficult to make progress if you're still adding new purchases to the same card.

You might repay $300 one month, but if you've spent another $250 on the card, you've barely moved forward.

And depending on your card's terms, carrying a balance can mean losing the interest-free period on new purchases. That could make everyday spending more expensive than you realise.

If possible, consider switching to a debit card for day-to-day purchases while you work on clearing your credit card balance.

That way, the money you repay stays repaid.

It's also worth looking at your recent statements. Not to make yourself feel guilty about past purchases, but to understand where your money is going.

Are there subscriptions you no longer use? Regular expenses you could reduce? Small purchases that add up over a month?

Finding even $20 or $30 a week could make a meaningful difference when that money goes towards reducing high-interest debt.

3. Have more than one credit card? Pick a strategy

If you're juggling several credit cards, personal loans or other debts, deciding what to repay first can feel overwhelming.

The temptation is to spread your spare money evenly across everything.

But there are two popular strategies that can give your repayments more direction.

The avalanche method: save the most interest

With the avalanche method, you focus on the debt with the highest interest rate first, while continuing to make the required minimum repayments on your other debts.

Once the most expensive debt is cleared, you redirect that repayment towards the debt with the next-highest interest rate.

The advantage? You're attacking the debt that's costing you the most.

Over time, this generally minimises the total interest you pay, assuming the same repayment budget and no other complicating factors.

The snowball method: build momentum

The snowball method takes a different approach.

Instead of targeting the highest interest rate, you start with your smallest debt balance.

You make the minimum repayments on everything else, but direct your spare money towards clearing that smallest debt as quickly as possible.

Once it's gone, you take the money you were paying towards it and put it towards the next-smallest balance.

The advantage is psychological. Clearing an entire debt can feel like a genuine achievement, giving you the motivation to keep going.

So which is better?

If your priority is paying the least interest, the avalanche method generally comes out ahead.

But if seeing debts

Frequently asked questions

How can I pay off credit card debt quickly?

Pay more than the minimum every month, and direct spare money at the highest-interest card first while covering minimums on the others. Reducing the balance quickly cuts the interest compounding against you.

Should I pay off the smallest or highest-interest card first?

Paying the highest-interest card first saves the most in interest. Paying the smallest balance first can help motivation with an early win. The best choice is the method you'll stick with.

Will a balance transfer help me pay off my card?

It can, by pausing interest for an introductory period so repayments clear the principal faster. Watch for transfer fees, the higher reverting rate afterwards, and the temptation to add new spending.

Where to from here

Beating the minimum is the move that starts the exit. Otivo, a licensed Australian financial advice platform holding AFSL and Australian Credit Licence No. 485665, offers a debt advice module that helps you find effective ways to pay down debt while covering essentials, based on your debts, income and expenses. It helps you build a plan that actually clears the balance.

Sources

• ASIC MoneySmart — credit card debt and balance transfers — moneysmart.gov.au

Disclaimer

The information in this communication is current as at July 2026 and has been prepared by Otivo Pty Ltd ABN 47 602 457 732, AFSL and Australian Credit Licence No. 485665. This content is general information only and has been prepared without taking into account your objectives, financial situation or needs. It is not personal financial or taxation advice and should not be relied on as such. Before acting on any information, you should consider its appropriateness having regard to your personal circumstances. This material must not be reproduced in whole or in part, or posted on any social media platform, without the prior written consent of Otivo Pty Ltd.