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How the Calculator for Credit Card Payoff Operates
Using this calculator, you can see how long it would take and how much it would cost to pay off credit card debt in two different scenarios: contributing extra money each month or only making minimum payments. To get reliable results, it uses an iterative payout simulation based on a typical monthly compound interest calculation.
The Tool's Formulas
The monthly interest rate (APR divided by 12) is applied to the outstanding balance each month by the core computation. A percentage of the current debt (the minimum amount required) plus any additional amount you input is used to calculate the monthly payment. Next, the algorithm:
- Balance × (APR/12) is the formula used to calculate interest charged.
- Calculates the total payment by adding the extra payment to the balance × minimum percentage.
The loan is paid off that month if the payment is greater than the remaining amount plus interest. If not, the new balance is equal to the previous balance plus interest minus payment.
Steps are repeated until the balance is zero or, at most, 1,200 months (100 years); the tool indicates that the debt never goes away if the payment never covers the interest.
How to Operate the Calculator
Just enter your current credit card balance, annual percentage rate (APR), the minimum payment percentage that your issuer requires (typically shown on your statement), and any additional monthly payments you want to make. To view results, click Calculate.
- The number of months until the balance is zero is known as the months to payoff.
- The total amount of interest paid during the payoff period is the sum of all interest charges.
- Total payments: The sum of all interest and your initial balance.