How credit card interest works
Your APR is a yearly rate, but interest is charged every billing cycle. Most issuers divide the APR by 365 to get a daily rate and apply it to your average daily balance. This calculator uses the simpler monthly version (APR ÷ 12), so your statements may differ by a few dollars. At 22.99% APR, a $5,000 balance builds up about $96 of interest in a month. Every payment covers that interest first, and only the rest reduces what you owe.
Why minimum payments take so long
A minimum payment is designed to keep your account in good standing, not to get you out of debt. With a "1% plus interest" minimum, only about 1% of your balance goes to principal each month. As the balance shrinks, so does the minimum, which stretches the payoff out for years. Use the comparison above to see how many years and how much interest a fixed payment saves you.
Your statement shows this too. Under the Credit CARD Act of 2009, US card statements include a "Minimum Payment Warning" box with how long minimum payments would take and what they would cost in total, plus the monthly payment that would clear the balance in three years.
Ways to pay off a card faster
- Pay a fixed amount, not the minimum. Keep paying your first month's amount even as the minimum drops. That alone usually cuts years off.
- Find the money in your budget. The 50/30/20 budget calculator shows how much of your pay could go to savings and extra debt payments.
- Ask for a lower rate. If you've paid on time, calling your issuer to ask for a lower APR costs nothing, and it sometimes works.
- Consider a balance transfer carefully. A 0% intro APR can save a lot, but transfer fees are often 3% to 5% of the balance, and the rate jumps when the promotion ends. Run both scenarios here before deciding.
- Several cards? Put extra money on one card at a time: the highest APR first (avalanche) or the smallest balance first (snowball). The snowball vs avalanche calculator compares both.
FAQ
Does this include new purchases?
No. It assumes you stop using the card while you pay it off. New charges add to the balance and push your payoff date back.
What if my payment doesn't cover the interest?
Then the balance never goes down. The calculator warns you and shows the smallest payment that would make progress.
Can I use this for a car loan or personal loan?
Installment loans have a fixed payment and term, so use the loan calculator with extra payments instead. It shows the amortization schedule and how much paying extra saves.
Does this calculator store my data?
No. Everything is calculated in your browser.
For education and planning only. This isn't financial advice. Results are estimates; your card issuer's numbers may differ.