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Updated Dec 18, 2023

Credit Card Payoff Calculator

Monthly repayments on credit cards reduce your disposable income every month. Use this calculator to find out how to clear a credit card account faster.

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Mark Fairlie, Business Operations Insider and Senior Analyst
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This guide was reviewed by a Business News Daily editor to ensure it provides comprehensive and accurate information to aid your buying decision.

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Free up more cash to spend every month with our credit card payoff calculator. By paying more each month to clear your credit card balance, you can improve your financial situation and become debt-free faster.

Key terms for the credit card payoff calculator

Our calculator determines how much faster you’ll clear an individual credit card balance by making higher monthly repayments and how much you’ll save on interest by doing so. Below, find out the meanings of key terms used in the credit card payoff calculator.

Current credit card balance

Your current credit card balance is the amount you owe your lender right now.

This is also known as your outstanding balance, which includes the following:

  • The principal balance (the money you’ve borrowed and haven’t repaid yet) 
  • The interest you’ve incurred on the principal balance
  • Other charges, like an annual fee

You can find your current credit card balances by logging in to your card provider’s website or app.

Proposed additional monthly payment

In this field, enter how much extra you could set aside each month to clear your credit card balance.

Annual percentage rate

The annual percentage rate (APR) is the interest rate your credit card company charges you when you make a purchase or draw down a cash advance on your card.

The level of APR affects your monthly payments. Your provider works out how much interest to charge you during a billing cycle by applying the agreed rate of interest to your average daily balance. 

Minimum payment percentage

As part of your agreement with your issuer, you’ll be required to make a minimum payment each month. This is usually expressed as a percentage. Enter the minimum payment percentage into the field in the calculator.

Minimum payment amount

In addition to your minimum payment percentage, your credit card issuer may require you to make a minimum monthly payment in dollars. For example, you may be required to make a minimum repayment of 3% on your current balance, subject to a minimum of $50. If that’s the case, enter that dollar amount into the field.

Skip December payment when offered

Some credit card companies offer the option to skip December payments to help customers manage their cash better around the holidays. Although this can be helpful, interest continues to accrue on your balance during this time, potentially lengthening your debt repayment period.

What are the best methods for paying off your credit card?

There are three main approaches to paying off your credit card debt faster:

1. Balance transfer credit cards

Balance transfer cards allow consumers to move their existing debt from one card provider to another.

When you transfer your balance, you pay a very low rate or zero interest on the amount transferred for a limited time — a few months up to two years, depending on the lender. If you’re currently paying 20% to 30% APR on your card, you could save a lot of money during this time.

You usually pay a fee of 2% to 3% on your entire balance when you transfer to your new provider.

While you will save money with the deals offered on many balance-transfer cards, your new provider will start charging you interest at some point. To keep your costs down after the promotional period has ended, choose an issuer with an interest rate that is lower than that of the issuer you’re leaving.

When the promotional period ends, you can take advantage of another balance-transfer deal from another issuer. However, doing this repeatedly can hurt your credit score.

2. Debt avalanche method

The debt avalanche and snowball methods can be suitable if you have multiple credit cards with different interest rates and balances.

The debt avalanche approach focuses on clearing credit accounts that have the highest interest rates first. With this type of repayment plan, you reduce the amount you pay in interest each month. When the account with the highest interest rate has been cleared in full, you then focus on the account with the next-highest interest rate.

3. Debt snowball method

The debt snowball method focuses on clearing the credit account with the smallest balance first. Once you’ve achieved that, you move on to the account with the next-smallest debt.

Debt avalanche vs. debt snowball

Both the debt avalanche and debt snowball methods help consumers pay down their debt faster, particularly if they can pay more than the monthly minimum.

The debt avalanche approach will save you more money over time, but you won’t get the pleasure of completely paying off current credit card accounts as quickly as you will with the debt snowball approach.

Use our debt payoff calculator to see how much you'd save with either the debt avalanche or snowball method. You can use the calculator to prioritize paying off all of your credit lines, including credit cards, auto loans, personal loans and home equity loans.

What are the risks of not paying off your credit card?

Not paying off your credit card debt can significantly hurt your financial standing. If you fail to make your credit card payments by the due date, you’ll be subject to late-payment fees, in addition to high interest on the balance. Plus, your credit limit may be reduced, and your lender may increase your interest rate. If you repeatedly miss your payments, this will be reflected in your credit history, too.

How does credit card debt impact your credit score?

Managing your credit card debt well can improve your credit score over time, as it shows lenders that you can handle money well. One way to do this is to maintain a healthy credit utilization ratio, which compares your credit card balance against your credit card limit.

Each credit bureau is different, but as a rule, try to ensure that your card’s balance is no greater than 30% of your limit. If it’s constantly higher than that, a bureau might think you rely on credit to meet your financial obligations and, in turn, lower your credit score.

Should I consolidate my credit card debt? 

Another option you could choose to pay off your credit cards is a debt consolidation loan. You can also use a debt consolidation loan to pay off other credit facilities, like personal, auto and student loans.

Most debt consolidation loans charge a much lower interest rate than credit cards and personal loans do. This means your monthly repayments will be much lower, and instead of making multiple payments each month, you make only one.

If you secure a debt consolidation loan against the equity in your property, you may benefit from even lower interest rates. Bear in mind, though, that if you don’t keep up repayments on your debt consolidation loan, your property may be repossessed.

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Mark Fairlie, Business Operations Insider and Senior Analyst
Mark Fairlie is a telecommunications and telemarketing expert who has spent decades working across advertising, sales, and more. He is the former co-owner of Meridian Delta, a direct marketing company that he successfully sold to new management in 2015. Through this experience, Fairlie gained firsthand knowledge of the life of an entrepreneur, from conceiving a business idea to growing a company at scale to transferring ownership. In the time since, Fairlie launched a second marketing company as well as a sole proprietorship. He has expanded his purview to include topics like cybersecurity, taxation and investments as they relate to B2B business owners like himself.
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