How the payoff is calculated
Each month, interest is added at one-twelfth of the APR and your payment is subtracted. The calculator repeats that until the balance reaches zero; the final payment is only what is left, so the totals are exact for a fixed payment.
If the payment is not larger than the monthly interest, the balance never falls. Issuers actually compute interest on the average daily balance, so your statement may differ by a few dollars.
Why the minimum payment costs so much
Minimum payments are set to keep the account current, not to clear the debt. Because the minimum falls as the balance falls, most of each payment goes to interest for years. The “typical minimum” row above uses a common issuer formula — 1% of the balance plus interest, at least $25 — to show the gap. Your statement has a box with your issuer’s own estimate, as required by the CARD Act.
Ways to pay less interest
- Pay a fixed amount, not the minimum. Keeping the payment steady as the balance drops is the single biggest lever.
- With several cards, target the highest APR first (the avalanche method) to minimize interest, or the smallest balance first if quick wins keep you going.
- Ask for a lower rate. Issuers sometimes reduce the APR for customers with a good payment history.
- Consider consolidation with a lower-rate personal loan if you can avoid new card balances.
Once the card is paid off, redirecting the same monthly amount into savings adds up quickly — the compound interest calculator shows how much.
Common questions
Why does my payment barely reduce the balance?
Interest is charged on the balance every month before your payment is applied. At 24% APR, a $5,000 balance accrues about $100 a month, so a $150 payment only reduces the debt by about $50. The closer your payment is to the monthly interest, the slower the progress.
How is the minimum payment calculated?
Card issuers set their own formulas. A common one is 1% of the balance plus that month’s interest, with a floor of around $25 to $40. Because the minimum shrinks as the balance falls, paying only the minimum can stretch a payoff over many years. Your statement shows the issuer’s own estimate.
Does this assume I stop using the card?
Yes. The estimate assumes no new purchases, fees or rate changes, and the same payment every month. New charges extend the payoff time.
Would a balance transfer or personal loan help?
Either can cut the interest if the new rate is clearly lower and you avoid new card debt. Balance transfers usually charge a 3% to 5% fee and the promotional rate expires; a personal loan gives a fixed payoff date. Compare the totals before switching.
Sources
- CFPB — Credit card minimum payments and how interest is charged
- Federal Reserve — G.19 Consumer Credit (average credit card interest rates)
Results are estimates for educational use and are not financial, tax or legal advice. Confirm figures with your lender, plan administrator or a tax professional before you act. Spotted an error? Tell us.