Credit Card Payoff Calculator: Debt Payoff and Interest Calculator

Table of Contents - Credit Card Payoff

How to Use This Calculator
The Core Principle: Amortization in Reverse
How to Calculate Credit Card Payoff
Real-World Applications
Scenarios People Actually Run Into
Trade-Offs and Decisions People Underestimate
Common Mistakes and How to Recover
Related Topics
How This Calculator Works
FAQs

How to Use This Calculator - Credit Card Payoff

Enter your Current Balance—the total amount you owe on the card.

Enter the Annual Interest Rate (APR)—the percentage rate shown on your statement.

Choose your Payoff Strategy:

Fixed Payment: Enter the monthly payment amount you can make. The calculator shows how long until payoff and total interest.
Target Time: Enter when you want to be debt-free. The calculator shows the required monthly payment.

Click "Calculate" to see results. The output displays:

Months to payoff (for fixed payment strategy)
Required monthly payment (for target time strategy)
Total amount you'll pay
Total interest you'll pay
Interest savings compared to minimum payments only
Time saved compared to minimum payments

A comparison shows what happens if you only make minimum payments—often shocking in both time and cost.

The Core Principle: Amortization in Reverse

Credit card debt works like a loan in reverse. Each month, interest accrues on your remaining balance. Your payment covers that interest first; the remainder reduces principal.

The challenge: credit card rates are high (typically 18-25% APR), making interest charges substantial. Minimum payments are designed to be small—often just 2% of balance or $25, whichever is higher—which barely exceeds the interest charge.

The math is straightforward but the implications are startling. A $5,000 balance at 20% APR, paying only minimum, takes 25+ years to repay and costs $7,000+ in interest—more than the original debt.

Fixed payments above minimum accelerate payoff dramatically. Even small increases ($25-50 extra) can cut years off repayment and save thousands in interest.

How to Calculate Credit Card Payoff

Monthly interest rate: Monthly rate = APR ÷ 12 ÷ 100

Example: 20% APR Monthly rate = 20 ÷ 12 ÷ 100 = 0.01667

Minimum payment calculation: Typically: Greater of (2% of balance) or ($25 + interest)

Example: $5,000 balance at 20% Monthly interest = $5,000 × 0.01667 = $83.33 2% of balance = $100 Minimum = $100 (higher of the two)

Time to payoff with fixed payment: Months = -log(1 - (Balance × Monthly rate / Payment)) / log(1 + Monthly rate)

Example: $5,000 at 20%, $200/month payment Months = -log(1 - (5000 × 0.01667 / 200)) / log(1.01667) Months = -log(0.5833) / 0.01653 = 32.6 months

Total interest: Total paid = Payment × Months Interest = Total paid - Original balance

Example: $200 × 33 = $6,600 paid Interest = $6,600 - $5,000 = $1,600

Payment needed for target payoff: Payment = Balance × [rate × (1 + rate)^months] / [(1 + rate)^months - 1]

Real-World Applications

Debt elimination planning. Set a target payoff date and learn exactly what monthly payment is required. Build this into your budget as a fixed expense.

Extra payment analysis. See how adding $50 or $100 to your payment changes the payoff timeline and total interest. The visualization often motivates increased payments.

Debt consolidation evaluation. Compare your current payoff cost with a consolidation loan. Lower rate? Faster payoff? Or just lower payment with longer term (often worse overall)?

Balance transfer decisions. A 0% APR transfer offer looks good, but can you pay it off before the promotional period ends? Calculate to make sure.

Minimum payment wake-up call. Showing someone that minimum payments on their $10,000 balance will take 30 years and cost $15,000 in interest often changes behavior immediately.

Scenarios People Actually Run Into

The minimum payment trap. You've been paying the minimum for years and barely see the balance drop. The calculator reveals why: 80% of your payment goes to interest, only 20% to principal.

The promotional rate cliff. You transferred a balance to a 0% card. In 18 months, the rate jumps to 24%. The calculator shows whether you can pay it off in time—and the cost if you can't.

The multiple card juggle. You have three cards with different rates and balances. The calculator helps you determine which to attack first (highest rate for math optimization, or lowest balance for psychological wins).

The unexpected windfall decision. You received a $2,000 tax refund. Pay down the 22% credit card or the 6% car loan? The calculator makes the math clear (always the high-rate debt).

The payment illusion. You're paying $500/month and feel virtuous. But at 25% APR on a $15,000 balance, half of that covers interest. Only $250 reduces your debt.

Trade-Offs and Decisions People Underestimate

Extra payments versus emergency fund. Should you throw every dollar at debt? Emergency funds at 0% earn nothing, but they prevent new debt when emergencies hit. Balance is key—usually $1,000-2,000 emergency fund first, then aggressive debt payoff.

Avalanche versus snowball. Avalanche (highest rate first) minimizes total interest mathematically. Snowball (smallest balance first) provides quick wins that build motivation. Psychological factors sometimes outweigh math.

Credit score impact. Paying off cards improves credit utilization, boosting your score. But closing old accounts after payoff can hurt average account age. Keep paid-off cards open with zero balance.

Lifestyle reduction versus income increase. Cutting expenses $200/month versus earning $200 more—both add $200 to debt payments. Cutting is immediately available; earning takes time but has no ceiling.

Balance transfer costs. A 3% transfer fee on $10,000 is $300. At 0% for 18 months versus 22% APR, is the transfer worth it? Calculate both scenarios including the fee.

Common Mistakes and How to Recover

Paying fixed minimum, not fixed amount. Minimum payments decrease as balance drops, extending payoff indefinitely. Set a fixed payment amount (at least your current minimum) and maintain it regardless of balance.

Continuing to use the card. You're paying $300/month but charging $200. Net progress: $100. Stop using the card during payoff, or you're chasing a moving target.

Ignoring the rate. A $5,000 debt at 10% and $5,000 at 25% look the same but aren't. Always attack the highest rate first (unless snowball motivation is critical for you).

Only focusing on monthly payment. A debt consolidation loan might lower your monthly payment but extend the term. Total cost matters more than monthly convenience.

Not negotiating the rate. Many issuers will lower your APR if you call and ask, especially if you have good payment history or competitive offers. A rate reduction accelerates payoff immediately.

How This Calculator Works

Monthly rate calculation: r = (APR / 100) / 12

Minimum payment estimation: Minimum = max($25, max(0.02 × Balance, r × Balance + 0.01 × Balance)) This approximates typical minimum payment formulas.

Payoff time (fixed payment): If Payment ≤ Balance × r, payoff is impossible (payment doesn't cover interest) Otherwise: n = -log(1 - (Balance × r / Payment)) / log(1 + r)

Total paid: Total = Payment × n (rounded up to whole months)

Interest paid: Interest = Total - Balance

Required payment (target time): Payment = Balance × [r × (1 + r)^n] / [(1 + r)^n - 1]

Minimum payment scenario: Simulates month-by-month with decreasing minimum payments, tracking total time and interest.

Savings calculation: Compares fixed payment results to minimum-only scenario.

All calculations happen locally in your browser.

FAQs

Why do minimum payments take so long?

Minimum payments are designed to maximize interest revenue for the issuer. They're typically just slightly above the monthly interest charge, leaving very little to reduce principal.

How much extra should I pay?

As much as you can afford after covering essential expenses and building a small emergency fund. Even $25 extra makes a meaningful difference on smaller balances.

Is it better to pay one card or split between several?

Mathematically, focus on the highest-rate card first (avalanche). Psychologically, some people succeed better paying off the smallest balance first (snowball). Choose the method you'll stick with.

What if I can't afford more than the minimum?

Look for ways to reduce the rate: call and negotiate, transfer to a lower-rate card, or explore debt management programs. Also examine expenses for potential cuts.

Should I close cards after paying them off?

Generally no. Open accounts with zero balance improve your credit utilization ratio. Closing old accounts can hurt your average account age. Keep them open, just don't use them.

How do promotional 0% rates work?

You pay no interest during the promotional period (typically 12-21 months). After that, regular rates apply—often to any remaining balance AND to the transfer fee retroactively if you haven't paid in full.

What's the difference between APR and interest rate?

For credit cards, they're essentially the same. APR includes fees for loans; credit cards don't typically have origination fees, so APR = interest rate.

Can I negotiate my credit card interest rate?

Often yes. Call customer service, mention your payment history, and ask for a rate reduction. Some issuers will lower rates to retain good customers, especially if you mention competitor offers.

What's a balance transfer and when should I use one?

Balance transfers move debt from one card to another, often with a promotional 0% APR period (12-21 months). This eliminates interest during the promo, accelerating payoff. Use transfers when you can realistically pay off the balance before the promo ends—otherwise the deferred interest may hit hard.

How do minimum payments actually work?

Minimum payments are typically calculated as the greater of: a fixed amount ($25-35), a percentage of the balance (1-2%), or the sum of interest charges plus 1% of principal. They're designed to maximize interest revenue while keeping payments "affordable."

What's the difference between APR and interest rate for credit cards?

For credit cards, they're essentially the same. APR (Annual Percentage Rate) includes fees for loans, but credit cards typically don't have origination fees. Your monthly rate is APR divided by 12.

Should I pay off credit cards or save for emergencies first?

Build a small emergency fund ($1,000-2,000) first, then attack credit card debt aggressively. Without emergency savings, unexpected expenses force you back into debt. But don't wait for a full 6-month emergency fund before addressing high-interest debt.

What happens if I only pay the minimum forever?

You'll stay in debt for decades and pay total interest often exceeding the original balance. A $5,000 balance at 20% APR with minimum payments takes 25+ years to pay off and costs $7,000+ in interest—more than the original debt.

Credit Card Payoff Calculator — Debt Payoff & Interest Calculator