What do we actually pay ??? As already informed earlier , the interest that the bank charge, is compounded every month. That means that if you have an outstanding of $100 for purchases, and the APR is 14.25% for the same, then the amount for this month comes to 100+14.25% = $114.25. Remember, this amount is already inclusive of the interest. Now, the next month, the calculation is done on $114.25, and not $100. If you look at this closely, you will be able to understand that if you go ahead and make the minimum payments every month, then you are NOT getting rid of the outstanding. Even if you carry on paying for the next 50 years, the $100 outstanding will never come to an end. So, DON'T JUST PAY THE MINIMUM. Try and pay something more, as this practice will help you to reduce your principle amount.