Credit Card Payoff Calculator

How the minimum payment is calculated

Most US issuers charge the greater of a percentage of the balance plus that month’s interest, or a floor amount such as $25, and never more than what you still owe. This calculator uses 1% of the balance plus accrued interest with a $25 floor - the most common formula in card agreements - and it applies the same rule to the whole balance each month as the balance falls.

Because the minimum is recalculated every month on a shrinking balance, the payment itself declines over time and the payoff date stretches out. Early on, most of what you send covers interest; only a little touches principal. That slow start is exactly the trap the fixed-payment comparison exposes, because a balance on minimums can linger for decades while still costing a fortune in interest.

Why a fixed payment changes everything

A fixed payment keeps attacking the balance at the same rate, so the interest charge shrinks faster and the payoff accelerates with every month that passes. On a $5,000 balance at 22% APR, the minimum-only plan runs for well over a decade and racks up thousands in interest; adding $250 a month clears the same card in under two and a half years for a fraction of the cost.

Any extra amount you can commit is worth more the earlier it is applied, because it removes interest that would otherwise keep compounding for all the remaining months. Even a modest fixed sum shifts the plan from an open-ended obligation to a defined payment schedule you can see on the printed table.

What is not modelled

New purchases, cash advances, annual fees, penalty APR and late fees are excluded from the simulation, since each depends on how you actually use the card rather than on the numbers entered. The model assumes the rate stays fixed for the whole plan and that you keep paying every month until the balance reaches zero.

Real statements move for other reasons too: a rate reset at the end of a promotion, a missed payment, or new spending on the card all shift the payoff date. Treat the printed month as a target under those assumptions rather than a promise, and rerun the page whenever your rate or your payment changes.

The first payment is the largest payment

Because the minimum is recalculated on a falling balance, the first minimum payment is the biggest and the last one is only a few cents. By contrast a fixed plan stays level every month, which means it is paying down principal faster from the very first month - that front-loaded principal is precisely why the interest bill collapses over the life of the plan.

The printed schedule shows both payments side by side for every period, so you can watch the extra dollars working: they shrink the interest line each month and pull the balance to zero much sooner than the drifting minimum ever could.

Why the minimum barely moves the balance

A minimum payment is a percentage of a balance that is already shrinking, so it decays along with it. Interest is charged first each month, and only what is left over touches principal - which is why a balance can be paid faithfully for years while barely moving.

A fixed extra amount breaks that loop, and not only because it is bigger. Because it is the same every month, the principal portion stops shrinking as the balance falls, so the plan accelerates instead of flattening out near the end. The two columns on this page are the same balance under those two rules.

The practical test is the number of payments, not the monthly amount. Compare how many payments the minimum-only plan needs with how many the fixed plan needs; the difference is time you get back, and the interest saved is what that time was costing you.