Credit cards offer convenience and flexibility, but understanding how interest is calculated is crucial to avoid accumulating excessive debt.
This calculator helps you estimate the interest you might pay on your credit card balance, especially when making only minimum payments.
How Credit Card Interest Works
Credit card companies typically calculate interest daily based on your Average Daily Balance. However, for simplicity and common user understanding, this calculator uses a simplified monthly calculation model. The key components are:
Current Balance: The total amount you owe on your credit card at the start of the billing cycle.
Annual Interest Rate (APR): The yearly rate charged by the credit card company. This is usually expressed as a percentage.
Monthly Interest Rate: The APR divided by 12 (months in a year). For example, a 19.99% APR becomes approximately 1.6658% per month (19.99 / 12).
Minimum Payment: The smallest amount you are required to pay each month. This is often a percentage of the balance, plus any interest and fees.
Additional Payment: Any amount you choose to pay above the minimum required payment.
The Math Behind the Calculation
The interest accrued in a single month is calculated as follows:
1. Monthly Interest Rate:Annual Interest Rate / 100 / 12
2. Interest Charged for the Month:Current Balance * Monthly Interest Rate
3. Total Payment:Minimum Payment (calculated as % of balance) + Additional Payment
4. Amount Applied to Principal:Total Payment - Interest Charged for the Month
5. New Balance:Current Balance - Amount Applied to Principal
If the calculated 'minimum payment' is less than the interest accrued for the month, the minimum payment will effectively be the interest accrued plus a small percentage of the principal. This calculator simplifies it by taking the Minimum Payment Percentage applied to the Current Balance as the base minimum payment calculation before adding the Additional Payment.
Why This Calculator Matters
Paying only the minimum payment on a credit card can lead to paying significantly more in interest over a long period, and it takes much longer to pay off the debt. For example, if you owe $1,000 at 19.99% APR and only pay the 2% minimum, it could take over 4 years to pay off and cost you hundreds of dollars in interest. By using this calculator, you can:
Estimate the interest cost for a given month.
Understand how much of your payment goes towards interest versus principal.
See the potential impact of making additional payments beyond the minimum.
Always aim to pay more than the minimum payment whenever possible to reduce your debt faster and save money on interest.
function calculateInterest() {
var currentBalance = parseFloat(document.getElementById("currentBalance").value);
var annualInterestRate = parseFloat(document.getElementById("annualInterestRate").value);
var minimumPaymentPercentage = parseFloat(document.getElementById("minimumPaymentPercentage").value);
var additionalPayment = parseFloat(document.getElementById("additionalPayment").value);
var resultDiv = document.getElementById("result");
if (isNaN(currentBalance) || isNaN(annualInterestRate) || isNaN(minimumPaymentPercentage) || isNaN(additionalPayment)) {
resultDiv.innerHTML = "Please enter valid numbers for all fields.";
return;
}
if (currentBalance < 0 || annualInterestRate < 0 || minimumPaymentPercentage < 0 || additionalPayment < 0) {
resultDiv.innerHTML = "Please enter non-negative values.";
return;
}
var monthlyInterestRate = annualInterestRate / 100 / 12;
var interestCharged = currentBalance * monthlyInterestRate;
var calculatedMinimumPayment = currentBalance * (minimumPaymentPercentage / 100);
// Ensure minimum payment covers at least the interest charged if it's very low
var totalPayment = Math.max(calculatedMinimumPayment, interestCharged) + additionalPayment;
// Ensure total payment is not less than interest charged if minimum percentage is too low to cover interest
if (totalPayment < interestCharged) {
totalPayment = interestCharged + additionalPayment; // If calculated minimum + additional is less than interest, pay at least interest + additional
}
var amountAppliedToPrincipal = totalPayment – interestCharged;
var newBalance = currentBalance – amountAppliedToPrincipal;
// Ensure new balance doesn't go below zero due to payment
if (newBalance < 0) {
newBalance = 0;
}
// Round to 2 decimal places for currency
interestCharged = interestCharged.toFixed(2);
totalPayment = totalPayment.toFixed(2);
amountAppliedToPrincipal = amountAppliedToPrincipal.toFixed(2);
newBalance = newBalance.toFixed(2);
resultDiv.innerHTML = "Estimated Monthly Interest: $" + interestCharged + "" +
"Total Payment (Min + Addtl): $" + totalPayment + "" +
"Applied to Principal: $" + amountAppliedToPrincipal + "" +
"New Balance: $" + newBalance + "";
}