Credit Card Payoff Calculator

How credit card payoff is calculated

A credit card is an open-end, revolving account. Unlike a mortgage or a car loan there is no fixed term and no fixed payment — the issuer sets a minimum each month, and you choose whether to pay more. That single design choice is why credit card debt is so expensive.

Step 1 — The minimum payment formula

Issuers calculate the minimum as the greater of a flat floor or a percentage of the balance, plus that month's interest:

Minimum payment = min(balance + interest,
                       max(floor, balance × percentage) + interest)

interest = balance × (APR ÷ 12)

A typical US card uses 1% to 3% of the balance with a $25 floor. A typical UK card uses 1% of the balance plus interest, or 2.5% of the balance, whichever is greater. Because the percentage is applied to a shrinking balance, the minimum payment shrinks every month.

Step 2 — Why the minimum never gets ahead

Each month the issuer charges interest on the outstanding balance, then applies your payment. If the payment is only slightly larger than the interest, almost nothing goes to principal. The balance falls by a few dollars, the next minimum is a few cents smaller, and the cycle repeats. When the minimum is smaller than the interest charge the balance actually grows — the debt is revolving and will never be repaid on minimums alone.

Step 3 — The fixed-payment path

A fixed payment behaves like a loan payment. The balance follows the standard amortisation identity:

B_n = B₀(1 + i)^n − PMT × [ ((1 + i)^n − 1) ÷ i ]

B₀ = starting balance
i  = APR ÷ 12
n  = number of months
PMT = fixed monthly payment

Because the payment stays constant while the balance falls, the interest portion of each payment shrinks and the principal portion grows. The balance reaches zero in a predictable number of months, and the total interest is simply the sum of every interest charge along the way.

Step 4 — Solving for a target payoff date

If you want the card gone by a specific month, invert the formula to solve for the payment:

PMT = P × i × (1 + i)^n ÷ ((1 + i)^n − 1)

This is the same Reg. Z Appendix J formula used for mortgages and personal loans, which is why the numbers line up with your lender's own disclosure.

Worked example — $6,000 at 22.99% APR

• Minimum payment (2%, $25 floor): month one is $234.95. The balance never clears — the payment is too close to the interest charge.
• Fixed $250 payment: cleared in 69 months (5 yr 9 mo) with $5,380.04 of interest.
• Target 24 months: the required payment is about $316 a month, and total interest falls to roughly $1,580.
• Interest saved by paying $250 instead of the minimum: effectively the entire interest bill, because the minimum path never finishes.

Avalanche vs snowball on multiple cards

When you hold several cards, the order you attack them in matters. The avalanche sorts by APR descending and always minimises total interest. The snowball sorts by balance ascending and clears the smallest card first, which costs slightly more but produces an early psychological win. Both strategies assume you keep paying the same total budget every month and roll each cleared card's minimum into the next one.

UK and EU differences

UK issuers must display a representative APR under FCA CONC rules and must send persistent-debt warnings after 18 months of minimum payments. EU issuers follow the Consumer Credit Directive 2008/48/EC, which requires the annual percentage rate of charge to be disclosed in the same standardised way. The underlying arithmetic is identical, so the same calculator works for all three markets — just enter the APR printed on your statement.

How to use this calculator

1. Enter your full statement balance, not just this month's minimum.
2. Enter the purchase APR printed on your statement.
3. Pick your issuer's minimum-payment percentage (1%, 2% or 3%) — the calculator shows this month's minimum immediately.
4. Set a fixed monthly payment you can sustain and watch the payoff date and interest bill change.
5. Choose a target payoff date to see the exact payment required to hit it.
6. Toggle avalanche or snowball to compare the two multi-card strategies on a sample wallet.

What this calculator does not include

The projection assumes a constant APR, no new purchases, no annual fee, no late-payment penalty and no promotional rate expiring mid-way. Real statements can include all of these. Use the result as a planning estimate and check your statement for the exact terms. This calculator is educational and is not financial advice.