The rule this calculator assumes
Card agreements set the minimum in different ways. A common design is a percentage of the balance plus that month's interest, with a dollar floor so the payment never gets tiny. This calculator uses that design with 1% and a $25 floor as starting values. They are assumptions, and you can change both. Check your statement for your own card's rule and for the minimum payment printed on it.
Each month: interest = balance x APR / 12. Minimum payment = the larger of the floor and (percent x balance + interest), never more than the balance owed. New balance = balance + interest - payment. No new purchases, late fees or rate changes are modeled.
A worked example
A card has a $2,400 balance at 21.9% APR. The first month's interest is $2,400 x 0.219 / 12 = $43.80. One percent of the balance is $24, so the first minimum is $67.80. As the balance falls, so does the payment, which is why this takes so long.
| Plan | Payment | Time to pay off | Interest |
|---|---|---|---|
| Minimum each month | $67.80 and shrinking | 13 years, 1 month | $3,315.56 |
| Fixed payment | $67.80 | 4 years, 10 months | $1,493.38 |
| First minimum plus $50 | $117.80 | 2 years, 2 months | $628.51 |
Paying the minimum costs more in interest than the original balance and takes 157 months. Keeping the payment at $67.80 instead of letting it shrink cuts the time to 58 months. Adding $50 a month finishes in 26 months and saves about $2,687 of interest compared with the shrinking minimum.
Why the minimum keeps the debt alive
Interest is charged on the whole balance every month, and the minimum is built to be small. In the example, the balance is still $2,127 after one year of payments, down only $273 from $2,400. That slow start is the heart of the problem. The balance after year 2 is $1,886 and after year 3 $1,671, and the early years are mostly interest.
The cure is a fixed payment. Decide on a number you can keep paying every month, even if the card's minimum drops below it, and pay it until the balance is gone. If you set the percentage to 0 and the floor lower than the monthly interest, the calculator reports that the card never clears, which is the interest-only trap.
Common mistakes
- Treating the minimum as a payoff plan. It is a legal floor, set so the card stays open.
- Letting the payment shrink along with the balance. Keep paying the first month's amount.
- Adding new purchases while paying down the balance, which restarts the clock.
- Reading a 21.9% APR as the yearly cost on a balance you pay down. The monthly rate is APR divided by 12 applied to what you owe that month.
- Assuming every card uses the same minimum rule. Look at the one on your statement.
Estimate for learning, not financial advice. Inputs stay in your browser and are not sent or stored.