How is credit card interest calculated?

Interest is charged on the balance, usually daily, at the card's annual rate divided by 365. Each month the interest is added and your payment reduces the balance. Because interest compounds on what is left, paying only the minimum stretches the debt out for years.

Why does paying the minimum cost so much?

The minimum payment is often only 2 to 3% of the balance, much of which is interest. With little going to the actual debt, the balance barely moves and you pay interest for a very long time. Paying a fixed higher amount clears it far faster and cheaper.

What if my payment is less than the interest?

If your monthly payment is smaller than the monthly interest, the balance grows rather than shrinks and the card is never paid off. The calculator warns you when this happens so you can increase the payment.

Credit Card Interest Calculator

See how long it will take to clear your credit card and how much interest it will cost. Enter your current balance, the card's annual interest rate, and the fixed amount you can pay each month. The calculator shows the months to pay it off and the total interest. It is a clear way to see why paying more than the minimum saves so much.

Card balance

Interest rate (per year)

Monthly payment

0 months

to clear the card

Total interest$0

Total repaid$0

How credit card interest works

Interest is charged on your balance, usually daily, at the card's annual rate divided by 365. Each month interest is added and your payment reduces what is left. Because interest keeps building on the remaining balance, a small payment leaves the debt sitting there for years.

Worked example

A $5,000 balance at 19.95% with $250 a month clears in about 24 months and costs roughly $1,060 in interest. Paying only a 2.5% minimum (about $125, falling over time) would take many years and cost several times more.

Tips to clear it faster

Pay a fixed amount each month rather than the shrinking minimum.
Consider a lower-rate card or a personal loan to consolidate, if the total cost is lower.
Stop using the card while you pay it down, so new spending does not undo your progress.

Related calculators

Loan Calculator: repayments on a consolidation loan.
Debt Consolidation Calculator: combine debts into one.
Budget Calculator: free up money to pay debt.
Personal Loan Repayment Calculator: personal loan repayments.

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