The £15 Coffee - How Compound Interest On Credit Cards Turns Small Indulgences into Long-Term Burdens

1st December 2025

We often think of debt in terms of big-ticket items such as cars, holidays, or home improvements. But the truth is more unsettling.

If you don't pay off your credit card in full each month, you could still be paying interest today on a coffee you bought five years ago.

Here's how the maths works

The Mechanics of Credit Card Interest
Rolling balances: Every purchase you make is added to your balance. If you don't clear it in full, the leftover amount rolls forward.

APR (Annual Percentage Rate)
Most UK credit cards charge between 20-30% APR. That means if you carry £100 of debt, you’ll owe £20-£30 in interest over a year if you only make minimum payments.

Compound interest
Interest isn’t just charged once. Each month, unpaid interest is added to the balance, and then that balance earns more interest. It’s debt growing on debt.

Minimum payments trap
Paying only the minimum (often 2-3% of the balance) means most of your money goes to interest, not the principal. The original coffee purchase lingers in the pile, buried but not gone.

The £3 Coffee That Becomes £15
Imagine you bought a £3 latte in 2020 and never cleared your card.

At 25% APR, that £3 accrues about 75p of interest per year.

Over five years, with compounding, the cost could easily exceed £15.

You’re not literally paying "just for the coffee" anymore but the coffee is still part of the debt mountain attracting interest.

This is why financial advisors warn: credit cards are for short-term borrowing, not long-term debt.

How to Stop Paying for Old Coffees, Wine, Beer and many other small purchases

Always Clear in Full

If possible, pay off your balance monthly. Interest-free credit is the best deal in finance.

Target High-Interest Debt First

Focus repayments on the card with the highest APR. That’s where compounding bites hardest.

Avoid Minimum Payments

Paying the minimum keeps debt alive for years. Even small overpayments make a huge difference.

Use Balance Transfers Wisely

0% transfer deals can buy breathing space — but only if you stop adding new debt.

Think Before You Tap

Ask yourself: "Would I still want this coffee if it might cost me £15 in five years?"

The Takeaway
Debt isn’t just about big purchases. It’s about the everyday tap of a card, the casual latte, the forgotten balance. Compound interest is invisible but relentless turning small indulgences into long-term burdens. The £15 latte is a metaphor for how households can be trapped by stealth costs, paying for yesterday’s pleasures long after the cup is empty.