Credit Card Payoff Calculator

The minimum payment is usually set to look affordable: often the greater of $25-35 or around 1-3% of the balance. It is calibrated so the lender recovers their money slowly while you stay comfortable. The cost of that comfort is severe.

Total interest on that $5,000 reaches roughly $6,000 - more than the original debt. The balance falls slowly at first because most of each payment goes to interest, and only accelerates once the interest charge itself shrinks. That is the trap: the first years feel manageable while costing the most.

Note. A card at 20.9% charges about $87 in interest in the first month alone on a $5,000 balance. A $150 payment in that month clears only $63 of principal.

With multiple balances, the order you repay them in changes the cost and the motivation. Both methods below apply the same total payment each month.

Avalanche saves money because every dollar is aimed at the most expensive debt. Snowball saves time-to-first-clear, which matters more than it sounds: people who clear an account quickly are significantly more likely to finish the whole plan. A strategy you abandon saves nothing, so the cheaper method is only cheaper if you complete it.

Both beat making the minimum on everything. The gap between them is typically a few hundred dollars over several years - real, but small next to the gap between a plan and no plan.

Card issuers are required in many jurisdictions to apply payments above the minimum to the highest-rate balance first, but the details differ by issuer and by whether you are in a promotional rate period.

• Payments above the minimum should go to principal, but confirm your issuer does not apply them to the lowest-rate balance first - some still do.
• Promotional balances (0% balance transfers) usually receive the minimum payment while the promotional balance sits. Extra payments should be directed explicitly.
• Interest is calculated daily on most cards, using a daily periodic rate of APR divided by 365. Paying even a few days earlier in the month reduces the charge.
• Fees sit alongside interest. Annual fees and cash advance charges are not reduced by paying down the purchase balance.

The practical move: call and ask how a payment above the minimum is allocated, then put the answer into this calculator. If the answer is unhelpful, a balance transfer or a fixed personal loan at a lower rate often costs less than optimising the existing card.

Shortening the timeline raises the required monthly payment, but not linearly - interest falls as the balance falls, so the last months are cheap.

Going from ten years to three cuts interest by about 71% while roughly doubling the monthly commitment. Test what the payment would do to your budget before committing - a plan that forces you back onto the card defeats itself.

1. Stopping once the balance looks small. The final balance still accrues the full daily interest rate. A $600 remainder at 20.9% costs about $126 a year if left alone.
2. Closing a cleared card immediately. Closing reduces available credit and can raise utilisation on your remaining cards, which affects your credit profile. Keep it open and unused unless there is a fee.
3. Transferring without reading the fee. Balance transfer fees of 3-5% can outweigh a short promotional period. Compare the fee against the interest saved over the full promo window.
4. Running the balance back up. Paying down a card and re-borrowing on it resets nothing structurally - you have simply extended the loan at the same rate.
5. Ignoring the rate in favour of the payment. A lower monthly payment achieved by extending the term costs more overall. Always compare on total interest, not on what you pay monthly.