How the result is calculated
The flexibility of a card is exactly what makes card debt expensive: pay only the minimum and the balance barely moves, pay a fixed amount and it can vanish in a couple of years. This guide follows both paths month by month, shows the arithmetic the minimum-payment warning on your statement relies on, and sets out why the minimum rule itself depends on the country you hold the card in.
interestbalance × (APR ÷ 12)
principalpayment − interest
new balancebalance − principal
- balance
- what is owed at the start of the month
- APR
- the card's annual percentage rate; the monthly rate is APR ÷ 12
- payment
- the amount you pay that month: a fixed figure, the target-mode figure, or the country's minimum
In target mode the fixed payment that clears the balance in exactly n months comes from the amortising-payment formula:
paymentB × r ÷ (1 − (1 + r)−n)
- B
- the balance
- r
- APR ÷ 12
- n
- the number of months to your target
This model charges interest using APR divided by 12. Many card issuers instead use a daily rate and an average daily balance, so payment dates, statement length and new purchases can change the actual interest charge. Use your card statement and agreement to check the balance and rate; this projection is a monthly estimate rather than a reproduction of the issuer's ledger.
Worked example
| Item | Amount | How it is obtained |
|---|---|---|
| Monthly rate | 1.8333% | 22% ÷ 12 |
| Month 1 interest | $91.67 | 5,000 × 1.8333% |
| Month 1 principal | $108.33 | 200 − 91.67 |
| Balance after month 1 | $4,891.67 | 5,000 − 108.33 |
| Month 2 interest | $89.68 | 4,891.67 × 1.8333% |
| Month 2 principal | $110.32 | 200 − 89.68, a little more than last month |
| Payments to clear the balance | 34 | the last one is $149.90 |
| Total paid | $6,749.90 | 33 × 200 + 149.90 |
| Total interest | $1,749.90 | 6,749.90 − 5,000 |
The comparison line adds $50: at $250 a month the card is clear after 26 payments, eight months sooner, with $1,285.71 of interest, a saving of $464.19.
| Item | Amount | How it is obtained |
|---|---|---|
| Month 1 payment | $141.67 | 1% × 5,000 + 91.67 interest |
| Month 1 principal | $50.00 | only the 1% share reduces the debt |
| Month 2 payment | $140.25 | 1% × 4,950 + 90.75: the payment shrinks as the balance falls |
| Final payment | $22.85 | month 230, below the $25 floor because less than that is left |
| Months to clear the balance | 230 | over 19 years |
| Total interest | $8,099.70 | 13,099.70 paid − 5,000: more than the original balance |
Your statement's "minimum payment warning" box shows a similar calculation, which is why it usually quotes decades.
Reading the result
The headline is the time to pay off, with the number and size of the payments beneath it. Total interest and total paid follow, and in fixed mode a formula estimate gives the unrounded number of months from the closed-form formula, so you can see that the simulation and the formula agree. The chart traces the balance under your plan and under the comparison. The payoff schedule can be read By year, with the payments and interest in each year, or Every month, with each month's interest, principal and balance.
If a payment is equal to or less than the first month's interest, the balance cannot fall. On $5,000 at 22% that threshold is $91.67: pay exactly that and you tread water forever; pay less and the balance grows. The calculator shows a clear warning in this case and tells you the smallest payment that makes progress.
What changes the result
The minimum payment is set where you are, not by you
Minimum payments are an issuer convention rather than something you negotiate, and the conventions differ enough to change the answer by years. In the United States the minimum is typically 1% of the balance plus that month's interest and fees, with a flat floor of about $25 for small balances. Because the percentage part falls with the balance, so does the payment, and a card that starts at $142 a month is asking for $25 long before it is clear.
The distinction people miss is not the percentage but where the interest sits. Where the percentage is charged on top of the interest, as it is in the United States, every payment reduces the balance by the full percentage. Where the interest comes out of the percentage instead, which is the norm across Europe and Asia, a high rate can leave almost nothing going to principal: a headline 5% minimum on a card charging 3.5% a month repays barely 1.5% of the balance.
Some countries cap what a card may charge and some do not, and the ones that do use very different instruments: a flat statutory ceiling, a rate republished every quarter, or a court doctrine on usury. Type a rate above a country's ceiling and the tool says so. Choose your country on the calculator and it switches to that country's rule, floor and typical rate, and that country's page sets out what its regulator actually requires.
A fixed payment, and how much it is
Choose an amount and keep paying it even as the minimum falls. Every extra $50 a month takes months off the plan and hundreds off the interest:
| Fixed monthly payment | Months to clear $5,000 at 22% | Total interest |
|---|---|---|
| $125 | 73 | $4,095 |
| $150 | 52 | $2,798 |
| $200 | 34 | $1,750 |
| $250 | 26 | $1,286 |
| $300 | 21 | $1,022 |
To clear the same balance by a date instead, target mode gives the payment: $259.39 a month for 24 months, or $467.97 for 12.
Strategies the numbers support
- Highest APR first. If you carry several cards, run each through the calculator; put your extra money on the one with the highest rate and pay minimums on the rest. This "avalanche" minimises total interest.
- Consider a balance transfer carefully. A 0% promotional rate can save a lot, but the transfer fee (typically 3 to 5%) is added to the balance and the rate jumps when the promotion ends. Model it by entering the fee-inclusive balance at the promotional APR for the promotional months.
- Stop adding to the balance. The simulation assumes no new spending; every new purchase resets the clock.
What is not included
- Annual fees, late fees and penalty APRs. Enter the fee-inclusive balance and the rate your agreement actually charges.
- The daily-balance method. Issuers accrue interest daily on an average balance; this model charges it monthly on the opening balance.
- Promotional rates that change mid-plan. Model them in two steps, the promotional months at the promotional rate and the remainder at the standard rate.
- Rewards. Points earned on new spending are irrelevant while you carry a balance; the interest dwarfs them.
Using the result
The months-to-payoff figure sets your expectation; the total interest is the price of taking that long. Try the comparison field with different extra amounts until the total interest feels acceptable, then set that payment up as an automatic transfer so the plan survives the months when you are not paying attention.