Credit Card Payoff Calculator

What is a Credit Card Payoff Calculator?

A credit card payoff calculator is a financial tool that helps you determine how long it will take to pay off your credit card debt and how much interest you'll pay. It takes into account your current balance, interest rate, and payment amount to create a detailed payoff plan.

This calculator is particularly useful for managing credit card debt and creating a strategic plan to become debt-free. It helps you understand the impact of different payment strategies and how they affect your total interest costs and payoff timeline.

Credit Card Payoff Formulas

The primary formulas used in credit card payoff calculations are:

Minimum Payment Formula

Minimum Payment = Balance × Minimum Payment Percentage

Interest Accrual Formula

Daily Interest = Balance × (APR ÷ 365) Monthly Interest = Daily Interest × Days in Billing Cycle

Payoff Time Formula

n = -log(1 - (Balance × APR/12) ÷ Payment) ÷ log(1 + APR/12)

Where:

• n = Number of months to pay off
• Balance = Current credit card balance
• APR = Annual Percentage Rate (as a decimal)
• Payment = Monthly payment amount

How to Calculate Credit Card Payoff: Example

Let's walk through a step-by-step example:

Example Scenario

Suppose you have a credit card with:

• Current balance: $5,000
• APR: 18%
• Monthly payment: $200

1. Calculate daily interest rate:
   18% ÷ 365 = 0.0493% per day
2. Calculate monthly interest:
   $5,000 × (18% ÷ 12) = $75 interest for first month
3. Calculate principal payment:
   $200 - $75 = $125 principal payment
4. Calculate new balance:
   $5,000 - $125 = $4,875

Common Applications

• Debt Management: Create a strategic plan to pay off credit card debt efficiently.
• Payment Planning: Determine the optimal monthly payment to reach your payoff goal.
• Interest Savings: Calculate how much you can save by increasing your monthly payment.
• Debt Consolidation: Evaluate whether consolidating multiple cards makes financial sense.
• Budget Planning: Incorporate credit card payments into your monthly budget.