How credit card interest really works
A credit card does not charge interest once a year — it charges on your balance continuously, and this calculator models it the way your statement does, month by month. Each month the issuer takes your current balance, applies one month's worth of your APR, and adds it to what you owe. Your payment then covers that interest first; only what is left over actually reduces the balance. That order — interest first, principal second — is why a balance can feel stuck even when you pay every month: on a $5,000 balance at 24% APR, the first month's interest alone is $100, so half of a $200 payment evaporates before your debt falls by a single dollar. As the balance shrinks, the interest slice shrinks with it, which is why payoff speeds up near the end — and why the first extra dollars you add are the most powerful.
The monthly interest formula
Your APR is the annual rate; dividing by 12 gives the monthly charge this calculator applies to the current balance before each payment. (Many issuers actually compound daily, using APR ÷ 365, which costs slightly more — so treat these results as a close, slightly optimistic picture.) Whatever your payment leaves after interest is the principal paid that month, and the balance falls by exactly that amount.
The minimum-payment trap
Most cards set the minimum at a small percentage of the balance — 3% here — with a floor of around $25. That sounds manageable, but the minimum is designed to fall as your balance falls, so the debt stretches out for years. On the default balance in minimum-only mode, the first payment is just $150 and it drops every month after; you would spend far longer in debt and pay far more interest than with the fixed $200 payment in the worked example. Switch the payment type above to minimum and compare the payoff date and total interest — the difference is the trap, in numbers. The fix is simple: fix your payment at a dollar amount you can afford and never let it drift down as the balance falls.
Worked example
You owe $5,000 at 24% APR and pay a fixed $200 a month. Month one charges $100 of interest, so $100 of your payment reduces the balance to $4,900. Month two charges $98, so $102 reaches the balance. Following that pattern month by month, the card is cleared in 36 months, the total interest is $2,000.56, and you pay $7,000.56 in all to erase a $5,000 debt. Add just $50 extra a month and the payoff arrives months earlier with hundreds less interest — try it above and watch the date move.
Strategies that clear cards faster
- Avalanche: pay minimums on every card, then throw every spare dollar at the highest-APR card. This minimises total interest — mathematically the cheapest route.
- Snowball: attack the smallest balance first for a quick win and the motivation to continue. It costs slightly more interest but many people stick with it longer.
- Extra payments: any extra amount goes entirely to principal in this model, cutting next month's interest and every month after. Small, regular extras beat occasional large ones you never quite make.
- Stop adding charges: no strategy survives new spending on the card you are clearing. Model a combined plan for several debts with the Debt Payoff Calculator.
Worked example
You owe $5,000 at 24% APR and pay a fixed $200 a month. The first month's interest is $100 — half your payment — but the balance still falls, month after month, until the card is cleared in 36 months. Total interest: $2,000.56. Total paid: $7,000.56. Pay only the 3% minimum instead and the same balance drags on for years longer, costing far more interest — switch the payment type above to see exactly how much more.
How to use this calculator
- Enter the balance on the card today — check your latest statement for the exact figure.
- Enter the card's APR, also on your statement (use the purchase APR, not a promotional rate).
- Choose a fixed monthly payment, or minimum-only to see the true cost of paying the least allowed.
- Optionally set the minimum percentage and an extra monthly payment.
- Read your debt-free date, then increase the payment until the date and the interest feel acceptable — that is your plan.
What about balance transfers?
A 0% balance-transfer offer can pause the interest clock for 12–21 months, which makes every dollar of your payment pure principal. The catches: a transfer fee of typically 3–5% of the balance, a hard deadline after which the (often high) standard APR applies to whatever is left, and new purchases usually excluded from the 0% rate. Divide your balance by the number of promotional months to get the payment that clears it in time, then check that payment here with the APR set to 0 to confirm the plan works. Compare the fee against the interest you would otherwise pay using the APR Calculator.
One card or several?
This page models a single card in isolation, which is exactly what you need to test a payment amount. With several cards, list them by APR, clear them avalanche-style from the highest rate down, and roll each cleared card's payment into the next. The total-interest figure here, card by card, tells you which debt is truly the most expensive — it is not always the biggest balance.