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

This calculator shows how long it will take to pay off a credit card balance and how much interest that debt will cost you, turning a vague annual percentage rate into two numbers you can plan around. You enter three figures: your current card balance, the card's annual interest rate, and the fixed amount you can pay towards it each month. From these, the calculator works out how many months it will take until the balance reaches zero, the total interest you will pay over that time, and the total amount repaid once interest is added to the balance. If your monthly payment is lower than the interest building up each month, the tool warns you, because the balance would then keep growing rather than shrinking and the card would never be paid off. Use it to test different payment amounts and see how much increasing your monthly payment above the minimum cuts both the payoff time and the total interest, since credit card rates are usually high and compounding works against you the longer a balance sits there. It is also a handy way to compare clearing a card yourself against consolidating it into a lower-rate loan. The figures assume your rate and payment stay constant throughout, so treat the result as an indicative estimate rather than an exact forecast, as real-world rates, fees and payments can change.

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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.
Credit Card Minimum Payment Trap: the true cost of paying only the minimum.

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