Credit card interest is quoted annually but charged monthly. Divide by twelve to get the monthly rate: a 24% APR is 2% a month. On a 5,000 balance that is 100 of interest added every single month before any of your payment touches the principal.
The payoff period for a fixed monthly payment comes from the annuity formula rearranged for time:
Months = −ln(1 − r × P ÷ M) ÷ ln(1 + r)
where P is the balance, r the monthly rate and M your payment. The formula contains the whole story, because if r × P equals M, the logarithm is undefined — the debt never clears.
A balance of 5,000 at 24% APR:
| Monthly payment | Time to clear | Total paid | Interest paid |
|---|---|---|---|
| 100 | Never | Unlimited | Unlimited |
| 150 | 55 months, over 4.5 years | 8,321 | 3,321 |
| 200 | 35 months | 7,001 | 2,001 |
| 300 | 21 months | 6,145 | 1,145 |
| 500 | 12 months | 5,634 | 634 |
Look at the first row. Paying 100 a month on this balance is paying exactly the interest and nothing else — after ten years you would have handed over 12,000 and still owe 5,000. That is not a hypothetical; it is what happens whenever the payment equals the monthly interest charge.
Now look at the difference between 150 and 300. Doubling the payment does not halve the cost — it cuts the interest by two thirds and the time by nearly three quarters. Every extra unit above the interest charge attacks the principal directly, and the effect compounds. This is the single most useful thing to know about card debt.
Most issuers set the minimum as a small percentage of the balance plus that month accrued interest, often around 1% plus interest, with a floor of 25 or so. Because the percentage shrinks as the balance shrinks, the minimum falls too, and the payoff stretches out. On our 5,000 balance the first minimum would be about 150, and following the declining minimum for the whole life of the debt takes roughly 18 years and costs several times the original amount.
Card statements in many countries are now legally required to print how long the minimum payment will take, precisely because so few people worked it out. If your statement shows that line, read it.
With several cards, two strategies are commonly recommended and they optimise different things:
If the APR gap between your cards is large, avalanche wins clearly. If the balances are similar in cost, snowball is a reasonable choice.
A 0% transfer offer for 18 months with a 3% fee costs 150 on our 5,000 balance, against 3,321 of interest at 24% while paying 150 a month. The arithmetic is overwhelming — but only if you meet three conditions: you clear it, or nearly clear it, before the promotional rate expires; you do not put new spending on either card; and you do not miss a payment, which on most offers cancels the promotional rate immediately. Transfers fail as a strategy when they are used as breathing space rather than as a deadline.
This calculation assumes a fixed rate, a fixed payment, and no new spending. Real cards can have different rates for purchases, cash advances and transfers, and payments are typically allocated to the highest-rate balance first in some jurisdictions and the lowest in others. Penalty APRs after a missed payment can exceed 29%. Cash advances usually accrue interest from day one with no grace period. If your debt is unmanageable, a free non-profit debt counselling service can negotiate in ways a calculator cannot — that route is worth taking before any high-cost consolidation loan. Nothing here is financial advice.
Somewhat. Most cards compute interest on an average daily balance, so paying earlier in the cycle reduces that average and shaves a little interest. Paying twice a month rather than once has a small but real effect.
No. Lowering your utilisation ratio is one of the strongest positive factors. Keeping the account open with a zero balance is usually better for your score than closing it, since closing reduces your total available credit and can shorten average account age.
Generally yes, when the card rate far exceeds any interest your savings earn — 24% against 4% is not a close call. The usual exception is keeping a small emergency buffer, so an unexpected cost does not push you straight back onto the card.
No. The calculation runs entirely in your browser and nothing about your debt is transmitted or saved.
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