Credit card interest is where debt spirals begin. This calculator reveals the true cost of carrying a balance, showing how minimum payments trap you in years of debt and how small extra payments make huge differences.
How This Calculator Works
This calculator exposes the real cost of credit card debt:
- Current Balance: How much you owe
- Interest Rate (APR): Your card's annual percentage rate
- Payment Method: Minimum payments vs fixed payments
- Monthly Payment: What you're paying (or plan to pay)
- Total Interest: What you'll pay beyond your purchases
- Time to Payoff: How long until you're debt-free
The Formula Explained
Monthly Interest = Balance × (APR / 12)
With minimum payments (usually 2% of balance or $25): Most payment goes to interest, not principal
The average credit card APR of 20%+ means $1,000 debt costs ~$17/month just in interest.
Step-by-Step Example
$5,000 Balance at 22% APR
| Payment Strategy | Monthly | Months | Total Interest |
| Minimum (2%) | $100→$25 | 174 (14.5 years!) | $6,870 |
| Fixed $100 | $100 | 93 (7.8 years) | $4,311 |
| Fixed $200 | $200 | 32 (2.7 years) | $1,360 |
| Fixed $300 | $300 | 19 (1.6 years) | $736 |
Paying $200 vs minimum saves $5,510 and 12 years!
Frequently Asked Questions
How is credit card interest calculated?
Interest is calculated daily on your average daily balance. Your APR is divided by 365 to get the daily rate. Each day, interest accrues on your balance. This daily compounding means debt grows faster than annual rate suggests. That's why credit card debt is so dangerous.
What is a good credit card APR?
Average credit card APR is around 20-25% (2024). Excellent credit may qualify for 15-18%. Poor credit cards may charge 25-30%. Any rate above 0% on a carried balance is expensive. The only "good" APR is 0%—introductory offers or paying in full monthly.
Why do minimum payments take so long?
Minimum payments are designed to maximize lender profit. At 2% minimum, most goes to interest with tiny principal reduction. As balance drops, so does minimum—you pay less just as you should be finishing off the debt. Fixed payments work much faster.
How can I pay off credit card debt faster?
Strategies: (1) Pay more than minimum—even $50 extra helps enormously, (2) Use the avalanche method—attack highest APR first, (3) Balance transfer to 0% card (watch for fees), (4) Consolidation loan at lower rate, (5) Cut expenses and throw all extra at debt.
What is the average daily balance method?
Most cards use average daily balance for interest: add up your balance each day of the billing cycle, divide by number of days. Interest is charged on this average. Making a payment mid-cycle reduces your average daily balance and saves interest.
Do I pay interest if I pay my statement balance?
If you pay your full statement balance by the due date, you get a grace period and pay no interest. Carrying any balance eliminates the grace period—you're charged interest from purchase date on new transactions. Always pay in full to avoid the interest trap.
How does compound interest work against me with credit cards?
Credit card interest compounds—you pay interest on interest. A $1,000 balance at 20% doesn't just add $200/year. Daily compounding means interest added today earns interest tomorrow. Carrying balances year after year means paying interest on years of accumulated interest.
Is it better to pay off one big card or several small ones?
Mathematically: Pay the highest APR first (avalanche method)—saves the most money. Psychologically: Pay smallest balances first (snowball method)—quick wins maintain motivation. Choose based on your personality. Either is infinitely better than minimum payments.
Key Points to Remember
- Minimums are traps: Designed to keep you paying for decades
- Interest compounds daily: Debt grows faster than annual APR suggests
- Pay in full: Only way to truly avoid interest charges
- Extra payments help enormously: Small amounts make big differences
- 0% balance transfers: Useful tool but watch for fees and plan payoff