Reducing or eliminating credit card debt is a major financial goal for many people. The first step to paying down your credit cards is to make a plan, which is why we’ve created the credit card payoff calculator. The credit card payoff calculator shows how alternative debt payment options impact two aspects of your credit card balance: your total interest and the number of months required to pay off your balance.
Enter the information required below and your desired goal to see how much money you’ll have to pay and for how long in order to completely pay off your credit card. For more information on the terms used on the calculator, refer to the section below the tool.
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Here’s how to fill out the credit card payoff calculator. Note that this calculator is designed to estimate the payment options for one credit card. If you have several credit cards, do calculations for each one separately.
Enter how much you currently owe on your credit card, including interest charges. This number can be found on your current credit card monthly statement.
The interest rate is the fee the credit card company charges for letting you borrow their money. The interest rate is applied to outstanding balances. Many times, you can avoid paying any interest on your purchases by simply paying off your balance on time and in full each month.
Interest rates are typically stated as a yearly rate known as the annual percentage rate (APR). However, it is applied as a daily rate. Each day that you have an outstanding balance, your annual interest rate is divided by 365 and multiplied by your current balance. That amount is added to your bill. It’s easy to see how interest charges can add up and quickly become overwhelming.
Like interest rates on mortgages and other types of loans, credit card interest rates are influenced by factors like your credit score. They can vary from card to card and from person to person.
Just because you’re on the path to paying off your credit card doesn’t necessarily mean that you won’t be making purchases with it anymore. Estimate what your monthly charges will be as you pay it off. Look at previous credit card statements to get an idea of how much you charge to the card each month. If charges vary month to month, consider taking an average of what you spend over a year.
Enter the amount that you would like to pay each month. This is the entry that you have the most control over, and one of the biggest factors for how quickly you’ll be able to pay off the credit card. When you choose a larger monthly payment, look at the “Months to Pay Off” section on the right—it will go down. If you can manage it, making the largest payments possible will make your debt-free journey go even faster.
Paying off credit card debt is just one aspect of getting your personal finances in order. We want to provide you the kind of financial advice you need to accomplish your goals. Check out our blog posts on Money Management for more helpful articles!