Credit Card Calculator

How Credit Card Interest Works

Credit cards use compound interest, calculated on your average daily balance. When you only make the minimum payment each month, most of your money goes toward interest rather than reducing the principal. This is often called the "minimum payment trap" — it can take decades to pay off a balance this way, costing you far more than the original purchase price.

For example, a $5,000 balance at 20% APR with a $100 monthly payment would take over 10 years to pay off and cost more than $7,500 in interest alone. Increasing your monthly payment — even by a small amount — dramatically reduces both the payoff time and total interest. Use the Credit Card Payoff Calculator to find exactly what payment you need to be debt-free by a target date.

If you carry balances on multiple cards, consider a structured approach to tackling your debt. The Debt Payoff Calculator can show you how to use the avalanche or snowball method to eliminate multiple debts faster, saving thousands in interest over the long run.