Credit Card Payoff Calculator
Take control of your credit card debt with our free payoff calculator. Determine exactly when you'll become debt-free, see your interest costs, and explore strategies to save money on interest.
Understanding Your Credit Card Interest
Credit card interest is typically calculated using a daily periodic rate. Your APR (Annual Percentage Rate) is divided by 365 days to get the daily rate, which is then applied to your daily balance. This compounds daily, making credit card debt particularly expensive compared to other types of loans.
Why Minimum Payments Keep You in Debt
Most credit card issuers set minimum payments at 1-3% of your total balance. On a $5,000 balance at 22% APR, the minimum might be $110. However, roughly $91 of that goes to interest, leaving only $19 to reduce your principal. This means you'd need nearly 25 years to pay it off while spending over $7,000 in interest.
Strategies to Pay Off Credit Card Debt Faster
There are proven methods to accelerate debt payoff and save thousands in interest:
The True Cost of Carrying a Balance
Let's compare three scenarios for a $5,000 balance at 22% APR:
| Monthly Payment | Payoff Time | Total Interest Paid |
|---|---|---|
| $110 (minimum) | ~25 years | $7,900 |
| $250 | ~24 months | $1,100 |
| $500 | ~11 months | $250 |
Building a Credit Card Payoff Budget
To pay off your card faster, redirect money from your budget. Consider:
Credit Card Payoff FAQ
Q:What if my monthly payment doesn't cover the interest accrued?
If your payment is less than or equal to the monthly interest charge, your balance will never decrease—it will actually grow. For example, on a $10,000 balance at 25% APR ($2,500 yearly interest, or ~$208/month), a $150 payment won't reduce your principal. Our calculator will alert you if this is the case.
Q:How is credit card interest calculated?
Credit card interest is typically calculated daily using the daily periodic rate (APR ÷ 365). This daily rate is applied to your average daily balance, and interest compounds daily. Most cards use the 'average daily balance' method, which takes the average of your balance throughout the billing cycle.
Q:Does paying more than the minimum help?
Absolutely. Every dollar above the minimum payment goes directly to principal (after interest is covered). Paying $50 extra per month on a $5,000 balance at 20% APR can reduce your payoff time from ~20 months to ~11 months.
Q:Should I use a 0% APR balance transfer card?
If you qualify for a 0% APR card with a reasonable intro period (typically 6-21 months), it can be an excellent strategy. However, watch out for balance transfer fees (usually 1-5% of the amount transferred). Calculate the fee against your interest savings to determine if it's worth it.
Q:What if I have multiple credit cards?
Use the 'debt avalanche' method (highest rate first) or 'debt snowball' method (smallest balance first). Calculate each card's payoff time independently, then decide which cards to prioritize. Our calculator can help you run scenarios for each card.
Q:Can I lower my credit card interest rate?
Yes! Many cardholders successfully negotiate rate reductions by calling their issuer and asking. If you have a good payment history, they may reduce your APR by 2-5 percentage points. It never hurts to ask.
Q:How does paying off credit card debt affect my credit score?
Positive impact! Paying down credit card debt lowers your credit utilization ratio (how much of your available credit you're using). This is one of the biggest factors in your credit score. As your utilization drops, your score should improve within 1-2 billing cycles.