Credit Card Payoff Calculator
Create a plan to eliminate credit card balances and calculate total interest payments.
The Mathematics of Credit Card Payoffs
Unlike standard installment loans, credit card balances accrue interest monthly based on the Average Daily Balance. The standard interest formula is computed using monthly APR subdivisions:
Solving for Required Payment (Given Months):
If you specify a target number of months (N), the fixed monthly payment (P) required to amortize a balance (B) is:
Solving for Time (Given Monthly Payment):
If you specify a fixed monthly payment (P), the number of months (N) required to zero the balance is:
Note: If the monthly payment (P) is less than or equal to the monthly interest accrued (B * r), the card balance will grow indefinitely, meaning the debt will never be paid off.
Frequently Asked Questions
Credit card issuers set minimum payments extremely low (e.g. 1% to 2% of the balance plus interest). Paying only the minimum covers mostly the interest charge and very little principal, adding years to your debt lifecycle and costing thousands in interest.
APR (Annual Percentage Rate) does not account for the compounding of interest within the year, whereas APY (Annual Percentage Yield) represents the actual annual rate including interest compounding.