Credit Card Payoff Calculator

How credit card interest is charged

A card's APR is an annual rate, but interest is charged far more often than once a year. This calculator divides the APR by 12 and charges that monthly rate on each month's balance: at 18% APR that is 1.5% a month, so a $5,000 balance costs $75 in interest in the first month.

Most issuers actually use a daily periodic rate — the APR divided by 365, or occasionally 360 — applied to your average daily balance, so interest compounds a little more often than monthly. The effect is small, a few cents a month on a typical balance, but it means your statements will not match this schedule to the penny.

If you pay the full statement balance by the due date each month, most cards charge no interest on purchases at all: that is the grace period. Once you carry a balance, you usually lose it, and new purchases start accruing interest straight away. That is why this calculator assumes you stop using the card while you pay it off.

Why the minimum payment takes so long

A common US minimum payment rule is 1% of the balance plus that month's interest, with a floor of around $25 to $40. On $5,000 at 18%, the first minimum is $125.75 — and $75 of it is interest. Only about $50 reduces the debt.

Worse, the minimum is recalculated on every statement, so as the balance falls the payment falls with it, and the debt shrinks ever more slowly. Paying only the minimum on that $5,000 takes more than 18 years and costs about $6,450 in interest. Paying a fixed $200 a month clears it in 32 months for about $1,314 — roughly a fifth of the interest, from paying around $75 a month more at the start.

In the US, the Credit CARD Act of 2009 requires every statement to show a minimum payment warning: how long minimum payments alone would take to clear the balance and what they would cost in total, alongside the monthly payment that would clear it in three years. The calculator works out the same comparison, using the minimum rule you set.

Issuers set their own minimum rules — some use a flat percentage of the balance, typically 2% to 3%, rather than 1% plus interest — so set the rule fields to match your card agreement.

When a payment never pays the card off

There is a hard threshold: the payment has to be larger than the interest charged each month. On a $5,000 balance at 24% APR, a month's interest is $100. Pay $100 and the balance never moves; pay less and it grows. The calculator checks this and tells you plainly, along with what it would take to clear the balance in three years.

Some minimum payment rules can fall into the same trap. A rule of a flat 2% of the balance on a card charging 30% APR, which is 2.5% a month, never gets ahead of the interest, and the calculator reports that too rather than walking a schedule for a century.

Fees and new purchases raise the threshold further. A late fee or an annual fee added to the balance is charged interest like everything else.

Ways to clear a card faster

Every amount above the minimum goes straight to the principal, so a fixed payment that does not shrink with the balance is the single most effective change. Set the payment you can sustain, not the one the statement suggests.

If a card carries balances at different rates — a cash advance at a higher APR than purchases, say — US rules require any amount you pay above the minimum to be applied to the highest-rate balance first.

A 0% balance transfer can save a great deal, provided you clear the balance within the promotional period. Transfer fees are commonly 3% to 5% of the amount moved, and whatever remains when the offer ends is charged the card's standard rate. It is also worth simply asking your issuer for a lower rate: if you have a good payment history, some will agree.

Because interest is usually charged daily, paying part of the amount earlier in the month lowers your average daily balance and trims the interest slightly. If you owe on several cards, the debt payoff calculator compares the snowball and avalanche orders for clearing them.

What this calculator assumes

The schedule assumes no new spending on the card, no fees, no change to the APR, interest at APR ÷ 12 each month and your first payment next month. Introductory rates, penalty rates and fees all change the real result. The figures are a planning tool, not a quote from your issuer, and not financial advice — your statement and card agreement are the authority on your account.