Credit Card Payoff Calculator

How the credit card payoff calculator works

Each month your card charges interest on the remaining balance at one-twelfth of the yearly rate. Your payment first covers that interest and the rest reduces the balance. The calculator repeats this month by month until the balance reaches zero, then adds up the interest. If you stop using the card, the number of months can also be found with this formula:

Months = −ln(1 − r × B ÷ P) ÷ ln(1 + r)

B is your balance, P is your monthly payment and r is the monthly rate (the APR divided by 12).

Example

A balance of $5,000 at 22% APR with a $200 monthly payment takes 2 years, 10 months to pay off and costs about $1,750 in interest. Raising the payment to $250 cuts that to 2 years, 2 months and the interest to about $1,286. A small increase in the payment saves a lot because the interest charge shrinks each month the balance falls.

Why minimum payments are slow

Minimum payments are typically a small percentage of the balance plus interest, so they fall as the balance falls. Paying only the minimum can keep you in debt for many years and cost far more in interest than the original balance. Choose a fixed payment that you keep the same each month, even as the minimum drops.

Ways to pay off a card faster

• Pay more than the minimum, and keep paying the same amount as the balance falls.
• If you have several cards, the avalanche method puts extra money toward the highest APR first and saves the most interest. The snowball method targets the smallest balance first, which some people find more motivating.
• Consider a balance transfer card with a low introductory rate. These usually charge a transfer fee, often 3% to 5%, so compare it with the interest you would save.
• Stop adding new purchases to the card while you pay it off.

This calculator assumes a fixed APR and no new charges. Rates and fees vary by card, so check your statement for the exact figures.