How credit card interest is charged
Credit card interest is charged monthly on the balance you carry, at the APR divided by 12 (most issuers actually use a daily rate, which gives nearly the same result). A fixed payment first covers that month's interest and the remainder reduces the balance, so with a small payment and a high APR the balance falls slowly at first and faster later. The calculator runs that month by month.
Worked example (pre-filled). A $5,000 balance at 22.99% APR accrues $95.79 of interest in the first month. Paying a fixed $200 a month clears it in 35 months (2.92 years) and costs $1,871.10 in interest, for $6,871.10 paid in total. To be done in 12 months instead takes $470.36 a month and costs $644.32 in interest.
The calculator assumes no new purchases and a payment that stays fixed rather than shrinking with the balance, which is how most issuers' minimum payments behave; a shrinking minimum stretches the payoff far longer than a fixed amount. If the payment does not cover the first month's interest, the balance grows and the tool says so. This page computes; it does not recommend a loan, lender, investment or tax position.
Formula and assumptions
months at payment P: n = −ln(1 − r × B ÷ P) ÷ ln(1 + r), then simulated month by month with cent rounding
payment for n months: P = B × r ÷ (1 − (1 + r)−n)
- Interest compounds monthly on the remaining balance; no fees, no new charges, no promotional rates.
- The last payment is smaller than the others; the month count includes it.
Frequently asked questions
How long to pay off $5,000 at $200 a month?
At 22.99% APR, 35 payments (34 of $200 and a final $71.10), with $1,871.10 of interest. At 0% it would be 25 months.
How is credit card interest calculated?
The APR is divided by 12 (or 365 for a daily rate) and applied to the balance carried each period. On $5,000 at 22.99% that is about $95.79 for the first month.
Why does paying only the minimum take so long?
Minimums are usually a small percentage of the balance, so they shrink as the balance falls and most of each payment goes to interest. A fixed payment pays off much faster.
What payment pays off $5,000 in a year?
At 22.99% APR, $470.36 a month; total interest is $644.32.
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Sources
This calculator gives general estimates from the figures you enter. It is not tax, legal, payroll or financial advice. See our disclaimer.