Credit Card Payoff Calculator
How This Credit Card Payoff Calculator Works
Managing credit card debt effectively requires understanding how interest compounds against your principal balance. This calculator uses the standard amortization formula to determine exactly how many months it will take to reach a zero balance based on a fixed monthly payment and your card's Annual Percentage Rate (APR).
To use this tool, input your current total balance, the interest rate provided by your bank, and the amount you intend to pay each month. The calculator assumes you will not make any additional charges to the card during the payoff period.
The Impact of High APR
Credit card interest is typically calculated daily based on your average daily balance. By entering a higher monthly payment, you reduce the principal faster, which in turn reduces the amount of interest that can accrue the following month. This creates a "snowball effect" for your savings.
Realistic Payoff Example
If you have a balance of $5,000 with an 18% APR:
- Paying $150/month: It will take approximately 47 months to pay off, costing you $2,001 in total interest.
- Paying $300/month: It will take approximately 20 months to pay off, costing you only $796 in total interest.
By doubling your payment in this scenario, you save over $1,200 in interest and become debt-free more than two years sooner.
Strategies to Pay Off Debt Faster
If your calculation shows a payoff timeline that is longer than desired, consider these strategies:
- Debt Avalanche: Focus extra payments on the card with the highest APR first to minimize total interest cost.
- Debt Snowball: Pay off the smallest balance first to build psychological momentum.
- Balance Transfer: Move high-interest debt to a 0% APR introductory offer card to ensure 100% of your payment goes toward the principal.