Credit Card Payoff Calculator
Calculate how long it will take to pay off your credit card balance and how much interest you’ll pay.
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Payoff Summary
Understanding Credit Card Debt Payoff
How Credit Card Interest Works
Credit card companies use daily compounding interest, which means interest is calculated on your balance each day based on your annual percentage rate (APR). The formula used is:
Daily Interest = (Balance × APR) ÷ 365
This daily interest is then added to your balance, meaning you pay interest on previously accrued interest – this is called compound interest. Even with the same APR, cards with daily compounding will cost you more than those with monthly compounding.
Minimum Payments: The Debt Trap
Most credit cards require you to pay between 1-3% of your balance each month as a minimum payment, often with a floor amount (like $25). While this keeps your account in good standing, it’s designed to keep you in debt longer:
$5,000 Balance at 18.9% APR
- Minimum Payment (3%): ~22 years to payoff
- $200 Monthly Payment: ~2.5 years to payoff
Total Interest Paid
- Minimum Payments: ~$6,800
- $200 Monthly: ~$1,200
This example shows how paying just the minimum can cost you 5 times more in interest and keep you in debt for decades!
Strategies to Pay Off Credit Cards Faster
1. The Avalanche Method
How it works: Pay minimums on all cards, then put all extra money toward the card with the highest interest rate.
Best for: People who want to save the most money on interest.
2. The Snowball Method
How it works: Pay minimums on all cards, then put all extra money toward the card with the smallest balance first.
Best for: People who need psychological wins to stay motivated.
3. Balance Transfer Cards
How it works: Transfer balances to a card with 0% introductory APR (typically 12-18 months).
Best for: Those with good credit who can pay off the balance during the promo period.
5 Tips to Reduce Credit Card Interest
- Pay more than the minimum – Even $20-50 extra per month makes a big difference.
- Make biweekly payments – Half your payment every two weeks results in 13 full payments per year.
- Negotiate a lower APR – Call your card issuer and ask for a rate reduction.
- Use windfalls wisely – Apply tax refunds, bonuses, or gifts toward your balance.
- Track your progress – Use calculators like this one to stay motivated.
Pro Tip: The Power of Small Increases
Increasing your payment by just $25-50 per month can shave months or years off your payoff timeline. For example:
- A $5,000 balance at 18.9% with $200 payments: 2.5 years to payoff
- The same balance with $250 payments: 1.9 years to payoff
That’s just $50 more per month saving you 7 months and about $300 in interest!