Credit Card Payoff Calculator

Credit card interest is typically calculated using the Average Daily Balance method. Your APR is divided by 365 to get the daily rate, which is applied to your balance each day. Interest compounds daily on most cards, meaning you pay interest on interest. This calculator uses monthly compounding (APR / 12) for a standard payoff estimate.

Minimum payments are usually only 1-3% of your balance, which barely covers the monthly interest charge. Most of your minimum payment goes toward interest, not principal. For example, on a $5,000 balance at 20% APR, a $100 minimum payment puts only about $17 toward the principal in the first month. That is why it can take decades to pay off a card with minimum payments alone.

Even small extra payments can save thousands in interest and years of payments. For instance, on a $5,000 balance at 20% APR with a $100/month payment, adding just $50 more per month could save you over $3,000 in interest and cut your payoff time roughly in half. This calculator shows you exactly how much extra payments save.

If your credit card interest rate is higher than what you would earn on savings (which it almost always is), paying off the card first generally saves you more money. Credit card APRs of 15-25% far exceed typical savings account yields of 4-5%. However, it is wise to maintain a small emergency fund before aggressively paying off debt to avoid going further into debt from unexpected expenses.