Credit Card Payoff Calculator
Escape the Minimum Payment Trap
The Minimum Payment Trap
Credit cards are designed to keep you in debt. The minimum payment (typically 1-3% of the balance) is calculated to be just enough to cover interest with a tiny sliver going to principal. This is why a $5,000 balance at 22% APR takes 30+ years to pay off with minimum payments — you're barely making progress.
Doubling or tripling the minimum payment dramatically changes the timeline. Paying $200/month instead of $100 on a $5,000 balance doesn't just halve the time — it cuts it by more than half because you're paying far less total interest.
How Interest Is Calculated
Monthly Interest ≈ Balance × (APR / 12)
Credit cards use daily compounding, which means you're charged interest on yesterday's interest. This is why the effective annual rate is slightly higher than the stated APR.
Credit Card Payoff Strategies
- Pay a fixed amount, not the minimum — Set a fixed monthly payment and don't reduce it as the balance drops. As interest decreases, more goes to principal, accelerating payoff exponentially.
- Use balance transfer wisely — Transfer to a 0% APR card and divide your balance by the promo months to get your required monthly payment. Set a calendar reminder 2 months before the promo ends.
- Stop using the card — No payoff strategy works if you keep adding to the balance. Use cash or debit for purchases until the balance is cleared. Remove the card from auto-fill and online stores.
- Call for a rate reduction — Call your card issuer and ask for a lower rate. If you have good payment history, many will reduce your APR by 2-5 points. It takes 10 minutes and can save hundreds.
- Consider a personal loan — A debt consolidation loan at 8-12% is much cheaper than a credit card at 22%. Fixed payments and a set end date also provide psychological benefits over revolving credit.
Frequently Asked Questions
How long does it take to pay off a credit card with minimum payments?
Much longer than you think. A $5,000 balance at 22% APR with 2% minimum payments takes over 30 years and costs $12,000+ in interest. That's why your credit card statement is required to show a '3-year payoff' amount — it's usually 3-5x the minimum payment.
What is a balance transfer card?
A balance transfer card lets you move existing credit card debt to a new card with a 0% introductory APR, typically for 12-21 months. You'll pay a transfer fee (usually 3-5% of the balance), but saving 20%+ in interest for over a year often makes it worthwhile. The key is paying off the balance before the promo period ends.
Does paying off credit cards improve my credit score?
Significantly. Credit utilization (how much of your available credit you're using) accounts for 30% of your FICO score. Dropping from 80% utilization to 30% can boost your score by 50-100 points. Ideally, keep utilization below 10% for the best scores.
Should I close credit cards after paying them off?
Generally no. Closing a card reduces your total available credit, which increases your utilization ratio. It also shortens your credit history over time. Instead, keep the card open with a small recurring charge and autopay. Only close if the card has an annual fee you can't justify.