Credit Card Payoff Calculator

Why the minimum payment is the most expensive option

Credit card minimums are designed to keep your account current, not to retire the balance. A common formula is 1% of the balance plus that month's interest, with a floor around $25 to $35. On a $6,000 balance at 24.99%, that produces a payment close to $155 — of which roughly $125 is interest. Only about $30 reduces what you owe.

Because the minimum is a percentage, it shrinks as the balance falls. The result is a curve that approaches zero without ever quite reaching it in a useful timeframe. The same $6,000 balance can take more than two decades to clear at the minimum while costing far more in interest than the original balance.

The arithmetic you should internalize

Interest each month is balance × APR ÷ 12. At 24.99%, that is about 2.08% of the balance every month. If your payment is 2% of the balance, you are paying less than the interest charge, so the balance grows until the floor payment kicks in. This is the mechanism behind "minimum payment traps" that consumer advocates warn about.

Two thresholds matter:

1. The break-even payment is the monthly interest charge. Pay less and the balance rises.
2. The escape velocity payment is comfortably above the interest charge. Every dollar beyond it attacks principal and compounds in your favor.

Fixed payments versus minimums

A fixed payment is predictable and much cheaper. Paying $300 instead of the declining minimum on a $6,000 balance typically cuts the payoff from decades to a few years and saves thousands in interest. The trade-off is cash flow: the fixed amount does not flex down if your income drops.

A practical hybrid is to set a fixed payment you can afford and treat any windfall as a one-time principal payment. The calculator's "if you paid 50% more" line shows the marginal benefit of stretching.

How the simulation works

The tool compounds interest monthly, adds it to the balance, then applies the payment. In minimum mode it recalculates 1% of the opening balance plus that month's interest, with a $25 floor — the structure most large issuers use. That formula always clears some principal, which is why a real minimum payment does amortize, just very slowly. In fixed mode it applies the amount you enter, capped at the remaining balance.

It stops at 600 months and reports an error rather than an infinite loop if the payment never covers the interest. It does not model new purchases, late fees, annual fees, or promotional APR expirations.

What the output does not tell you

• New spending. A single new charge can erase months of progress. The plan only works if the card stops being used for purchases.
• Promotional rates. A 0% intro offer that reverts to 29.99% after twelve months will behave very differently. Model the post-promo rate as a separate scenario.
• Credit score effects. Paying down utilization usually helps, but closing accounts or missing a payment can offset the benefit.
• Hardship programs. If you cannot make the payment, contact the issuer before defaulting. Many have temporary hardship or hardship-repayment programs.

A short action plan

1. List every card with its balance, APR, and current minimum.
2. Pay at least the fixed amount the calculator shows is sustainable.
3. Direct extra money to the highest-APR card.
4. Ask the issuer to lower your APR — a single phone call occasionally works.
5. Consider a 0% balance transfer only if the fee is small relative to the interest saved and you can clear the balance before the promo ends.
6. Stop using the card for new purchases until the balance is gone.

When consolidation makes sense

A personal loan or balance transfer can help if it materially lowers your blended rate and you have fixed the underlying spending pattern. It hurts if it merely moves the debt and frees up the cards for new charges. Compare the new loan's total interest from the amortization calculator against this payoff total before committing.