Why use this calculator
Credit card interest is charged at rates that would be considered outrageous in any other context, and the minimum payment is engineered so the balance clears as slowly as regulation allows. The result is a debt that feels manageable each month and costs a multiple of the original purchase.
Seeing the total interest and the number of months makes the situation concrete, and seeing what an extra fifty or a hundred dollars a month does is usually the thing that changes behaviour. This calculator also detects the situation where a payment is below the monthly interest, in which case the balance grows no matter how long you pay.
How to use it
- Take the balance and the purchase interest rate from your most recent statement.
- Note that cash advances usually carry a higher rate and no interest-free period, so a mixed balance will pay off slower than this shows.
- Enter what you actually pay each month rather than the minimum, unless the minimum is genuinely all you pay.
- Add an extra amount to see the effect; even small amounts shorten the term noticeably because they attack principal directly while interest is charged on the reducing balance.
What each result means
- Interest charged each month
- The interest the card adds in the first month at this balance and rate. A payment at or below this figure never reduces what you owe.
- Time to pay off
- How long the balance takes to reach zero at this payment, assuming no new purchases on the card.
- Total interest
- What the debt costs you, calculated with a correct final partial payment rather than a rounded-up estimate.
- Total repaid
- Balance plus interest. Everything that leaves your account before the card is clear.
- Interest in the first month
- How much of your first payment is consumed by interest before anything reduces the balance.
- Interest as a share of the balance
- Total interest relative to what you owed. Above 30% means the debt is costing you a third of itself again.
- Payment to clear it in 12 months
- The fixed monthly payment that clears the whole balance within a year at this interest rate, and how much interest that saves compared with your current payment.
- Time to pay off with extra
- How long the balance takes once your additional payment is included, which is usually years shorter than the base figure.
- Interest saved by paying extra
- The difference the extra payment makes. It is usually far larger than the extra amount suggests.
- Months saved
- How many months earlier the card clears. Even modest extra payments typically remove years.
- Minimum payment to make progress
- Shown when your payment does not cover the monthly interest. Below this the balance grows regardless of how long you pay.
The formula
Months to clear are found from
n = −log(1 − (B × r) ÷ P) ÷ log(1 + r)
- B
- the balance
- r
- the monthly rate
- P
- the payment
Because the final payment is partial, total interest is calculated by stepping through the schedule month by month rather than multiplying the payment by the number of months, which would overstate the cost by up to one payment. When the payment is at or below B × r, the debt never clears.
How this number is used in practice
Minimum payments are typically set at two to three per cent of the balance or a small fixed amount, whichever is greater. On a $5,000 balance at twenty per cent, paying only the minimum can take well over a decade and cost more in interest than the original debt.
The structure is legal and disclosed, and it is why the minimum is the single most expensive way to repay.
A balance transfer to a zero per cent card can genuinely help, but only with a plan. The promotional period is typically twelve to twenty-four months, there is usually a transfer fee of one to three per cent, and anything left when the promotion ends reverts to a high revert rate.
It works if you divide the balance by the promotional months and pay that amount; it fails if you treat it as breathing room.
The avalanche method, paying minimums on everything and directing all spare money at the highest-rate debt, minimises total interest. The snowball method, targeting the smallest balance first, costs slightly more and produces faster visible wins. The mathematically optimal method is worthless if you abandon it, so the honest advice is to pick the one you will actually finish.
Worked examples
$5,000 at 20.99% paying $200 a month
About 34 months to clear and roughly $1,750 in interest. A third of the original balance again.
The same balance paying $300 a month
Clears in about 20 months and costs roughly $980. Paying 50% more each month nearly halves the interest.
$5,000 at 20.99% paying $90 a month
Monthly interest is about $87, so almost the entire payment is interest and the balance barely moves.
When people use it
- Seeing the real cost of carrying a credit card balance
- Working out how much extra to pay to clear the card by a date
- Deciding whether a balance transfer offer is worth the fee
- Comparing avalanche and snowball repayment approaches
- Checking whether your current payment covers the interest at all
Tips
- Paying the minimum is the most expensive option available. Any increase shortens the term disproportionately.
- Stop using the card while paying it down. New purchases reset progress and often lose the interest-free period entirely.
- Cash advances usually carry a higher rate and start accruing interest immediately, with no grace period.
- A balance transfer works only with a plan: divide the balance by the promotional months and pay that amount.
- Call and ask for a lower rate. Card issuers frequently reduce rates for customers who ask and have a reasonable history.
- If the payment is below the monthly interest, the balance grows no matter how long you pay. That is the first thing to fix.
What it assumes, and where it stops being accurate
- No new purchases are made on the card during the payoff period.
- A single interest rate applies to the entire balance, whereas real cards often split purchases, cash advances and transfers at different rates.
- The rate is fixed for the whole period, though issuers can change it with notice.
- Annual fees, late fees and foreign transaction fees are excluded.
- Payments are made monthly, on time and in the amount entered.
- Interest is calculated monthly on the outstanding balance rather than on an average daily balance, which shifts the result slightly.
Terms used on this page
- Minimum payment
- The smallest amount an issuer will accept each month, typically two to three per cent of the balance.
- Balance transfer
- Moving a balance to another card at a promotional rate, usually for a fee.
- Revert rate
- The interest rate that applies once a promotional period ends.
- Avalanche method
- Repaying the highest-interest debt first to minimise total interest.
- Snowball method
- Repaying the smallest balance first for faster visible progress.
Questions people ask
- How long will it take to pay off my credit card?
- It depends almost entirely on the payment rather than the balance. $5,000 at 21% takes about 34 months at $200 a month and about 20 months at $300. Paying only the minimum can take more than a decade and cost more in interest than the original balance.
- Why does paying the minimum take so long?
- Because the minimum is typically two to three per cent of the balance, and a large share of it is consumed by interest. As the balance falls, the minimum falls too, so the payment shrinks alongside the debt. The structure is designed to keep the account open and profitable rather than to clear it.
- Is a balance transfer card worth it?
- Yes, if you have a plan and the discipline to follow it. Account for the transfer fee, usually one to three per cent, divide the balance by the number of promotional months, and pay that amount. Without a plan, the promotional period expires and the remaining balance reverts to a high rate, leaving you worse off after the fee.
- Should I pay off the highest rate or the smallest balance first?
- Highest rate first minimises total interest and is mathematically optimal. Smallest balance first produces faster visible wins and helps some people stay with the plan. The best method is the one you complete, so if momentum matters to you, the slightly higher cost of the snowball is a reasonable price.
- What happens if I only pay the interest?
- The balance never falls. You pay indefinitely and still owe the original amount, which is the worst possible position. If your payment is at or below the monthly interest charge, the calculator flags it and shows the minimum payment needed to make any progress at all.
- Does using the card while paying it off matter?
- Substantially. New purchases add to the balance and, on most cards, carrying a balance removes the interest-free period so new purchases start accruing interest immediately. Paying down a card you are still using is why many balances persist for years without obvious cause.
Use this with
Credit Card Payoff Calculator answers one part of the question. These pick up where it stops: Debt Payoff Calculator, Debt Consolidation Calculator, Loan Repayment Calculator and Budget Planner Calculator.
Where these figures come from
This calculation is jurisdiction-neutral arithmetic. No country-specific rules are applied.
- ASIC Moneysmart: loans and credit. Independent Australian guidance on borrowing costs
- Reserve Bank of Australia: indicator lending rates. Published lending and deposit rates
Credit Card Payoff Calculator produces an estimate for general information. It is not financial, tax, medical, legal or engineering advice. read the full disclaimer. Spotted a wrong number? Report it and it gets fixed. The form picks up this calculator and the inputs you used.