Credit Card Payoff Calculator

How credit card interest works

Credit card interest is charged on your balance every month at the card's APR divided by 12 (issuers usually calculate it daily, but the monthly figure is very close). A balance of $5,000 at 18 percent APR costs $75 in interest in the first month. If you pay only $75, the balance never falls: the payment covers the interest and nothing else. Anything above the interest reduces the balance, and that is where progress starts.

This is why paying the minimum feels endless. Minimum payments are often a small percentage of the balance plus interest, so they shrink as the balance shrinks, and the debt drags on for years. Paying a fixed amount, chosen to be well above the minimum, is the reliable route.

What different payments cost

On a $5,000 balance at 18 percent APR, the payment amount changes the outcome dramatically.

• $100 a month takes 94 months (nearly eight years) and costs $4,311.18 in interest, almost as much as the original balance.
• $200 a month clears the debt in 32 months and costs $1,313.96 in interest.
• $300 a month clears it in 20 months and costs $797.17.
• $75 a month never pays it off, because it only covers the interest.

Planning by date instead of by payment

Sometimes the question is not "how long will this take" but "what must I pay to be free by a date". The calculator has a second mode for exactly that. For the same $5,000 at 18 percent, being debt-free in 36 months needs $180.76 a month, in 24 months $249.62, and in 12 months $458.40. Compare that with the interest: the 12-month plan costs far less overall than the 36-month plan, at the price of a higher monthly effort.

Pick a date that is ambitious but sustainable, then build the payment into your budget as a fixed bill. Automating the payment on payday removes the temptation to skip it.

Snowball, avalanche and balance transfers

If you have several cards, the order of repayment matters. The avalanche method pays the minimum on every card and puts all spare money on the card with the highest APR; it minimizes the total interest. The snowball method targets the smallest balance first; it costs a little more but gives quick wins that keep many people motivated. Either beats spreading the money evenly.

A balance transfer to a 0 percent card can save a lot of interest, but only if you clear the balance before the promotional period ends and the transfer fee, often 3 to 5 percent, is smaller than the interest you would have paid. A consolidation loan at a lower rate works the same way. Use this calculator to compare your current plan with the plan under the new rate, and count the fee.

Habits that keep the balance from returning

A payoff plan fails when new spending is added to the balance. Stop using the card for new purchases while you pay it down, or pay new purchases in full each month. Build a small emergency fund, even $500 to $1,000, so an unexpected bill does not go back on the card. Check the statement each month to confirm the balance is falling by the amount you expect.

• Set an automatic payment above the minimum, not equal to it.
• Put windfalls such as tax refunds and bonuses on the highest-rate card.
• Ask your issuer for a lower rate; some will agree, particularly if you have paid on time.
• Avoid cash advances, which usually carry higher rates and fees from day one.

What the calculator assumes

It assumes a fixed APR, no new purchases, monthly payments of the same size and interest added monthly. Real cards change the minimum, add fees and may use daily balances, so your statement will differ a little. Use the result to compare plans and choose a target, then track your actual statements. For instalment debts use the Loan Calculator or the EMI Calculator, and to build savings after the debt is gone see the Savings Goal Calculator. The article how to pay off credit card debt faster explains the methods in more detail. Nothing you enter is sent anywhere.