Credit Card Payoff Calculator

You can figure out how much interest you will pay on your credit card by dividing the card's APR by 365. Then, multiply the result by your average daily balance and, subsequently, the number of days in the billing period. The interest charges you owe will also be listed on the credit card's monthly statement. Still, the easiest way to determine how much interest you will pay on a credit card is to use WalletHub's credit card payoff calculator. It's a free tool that allows you to input the amount of debt you have (or will have) and your interest rate to get a payoff plan and a cost estimate.

You can set a payoff date, and we'll tell you what monthly payments you'll need to make. Or you can set a fixed monthly payment, and we'll tell you how long it will take to pay off. We'll also tell you the total amount of interest you can expect to pay and even which credit cards can save you the most money.

Even if you use a credit card calculator, however, it's still a good idea to know how to crunch the numbers yourself.

How to Calculate Credit Card Interest Charges

1. Find your credit card's APR

Your credit card's APR will be listed in your cardmember agreement and on your monthly credit card statements.

2. Divide your APR by 365

An APR reflects the annual cost of borrowing, but credit card charges are assessed daily. Dividing by the number of days in a year gives you the daily interest rate – or daily periodic rate – for your credit card.

3. Multiply the daily interest rate by your average daily balance

Your average daily balance is the sum of your balances for each day in the billing period divided by the number of days in the billing period.

4. Multiply the resulting amount by the number of days in the billing period

When this calculation is done, you will have the interest charges due for the billing period. Just bear in mind that some details do vary by credit card company.

Whether you use WalletHub's calculator or calculate credit card interest charges by hand, you should first understand the basics of how credit card interest works. We'll highlight some key points below.

Key Things to Know About How Much Interest You'll Pay on Your Credit Card

• If you pay off your balance in full by your due date, you won't owe any interest.
• If you carry a balance from month to month, the interest you'll owe depends on your Annual Percentage Rate (APR). That shows how much interest you'd pay in a year. But since credit card interest gets charged daily, your card's interest rate is its APR divided by 365.
• Credit card interest compounds daily, which means the interest rate applies to your whole balance at the end of each day, including unpaid interest charges from previous days.
• The average APR among new credit card offers is 18.32%. But credit card APRs vary widely based on the applicant's credit standing.
• Nearly all credit card APRs are variable, as opposed to fixed, meaning they're based on a particular benchmark interest rate. This usually is the prime rate, which banks use when lending to each other.
• Many cards offer lower introductory APRs on purchases and balance transfers for a limited time, often starting at 0%. Once the introductory period ends, the APR will change to the normal rate.

There's no way to tell you how much interest you'll owe without knowing your card's balance and APR as well as the monthly payment you can afford. But if you plug that info into WalletHub's calculator, you'll have your answer in no time.

To find the interest rate on your credit card, look at your cardmember agreement and your monthly credit card statements. Your interest rate will be there in the form of an annual percentage rate (APR). But as “annual” implies, an APR is the cumulative interest rate for a whole year, which isn't all that helpful for calculating actual interest charges from day to day or month to month.

You can figure your daily interest rate – or daily periodic rate – by dividing your APR by 365 (days in a year) because credit card interest compounds daily. (It's worth noting that some card issuers may divide by 360 rather than 365). This calculation will give you the actual daily rate at which you accrue interest on a card. If your APR is 19.99%, your daily periodic rate would be 0.0547%.

The terms APR and interest rate are often used interchangeably. For general purposes, they express the same idea, though you'll get a much better sense of your actual “interest rate” by using the daily periodic rate.

It's worth noting that most credit card rates change (indicated in terms by a V next to your APR). So if the so-called prime rate that credit card APRs are tied to goes up, your rate will rise, too. A credit card agreement may note that the account's APR is the prime rate plus a certain fixed percentage. Or, your rate might rise to a penalty APR (also found in credit card terms) if you miss a payment. Your card issuer must notify you of a rate change 45 days before it takes effect, unless you're 60 days or more past-due on payment.

Though it's good practice to keep an eye on your APR, interest rates don't matter if you pay your credit card bill in full every month. If you aim to pay no interest, you won't have to worry about crunching these numbers.

A variable interest rate on a credit card is an interest rate that goes up and down with the index rate it's tied to, which is most often the Prime Rate. The Prime Rate is the interest rate banks give to the most creditworthy borrowers. The Prime Rate goes up and down, too, usually based on adjustments to the Federal Funds Rate, which changes based on the economic climate. Most credit cards today have a variable interest rate, which is sometimes signified by a "(V)" next to the card's APR .

Here is what you need to know about variable interest rates on credit cards:

What they are: Variable interest rates are interest rates based on the banking system's fluctuating rate, usually in accordance with the Prime Rate.

How they fluctuate: Variable interest rates change as often as the Federal Funds Rate changes. In a growing and healthy economic climate, the Federal Reserve will usually raise rates. In an economic downturn, they'll lower rates. In normal economic periods, changes to the Federal Funds Rate happen in small increments - half a percent here and there - over a span of years.

When the economy is in trouble, however - such as during the 2008 financial crisis or the COVID-19 pandemic - the rate may be changed quickly and significantly. The Prime Rate will change according to the Federal Funds Rate, and that change will eventually reflect on any variable interest rate credit cards. Credit card companies have been known to raise the margin they add to the Prime Rate in order to keep rates high for new offers, however.

Fixed vs. Variable credit card interest rates

The alternative to a variable interest rate is a fixed interest rate - an interest rate that doesn't change with any index rates. But fixed interest rate credit cards are virtually nonexistent these days, mostly due to the rules set in place by the CARD Act, which stipulates that card issuers can't change their interest rates whenever they want. Because of the law, fixed interest rate credit cards wouldn't be very lucrative to credit card companies in a changing economy.

If you're looking for a low interest credit card to finance your purchases, feel free to also check out some of the best 0% intro APR credit cards. But keep in mind that once the introductory rates are over, your remaining balance will be subject to the regular APR.

The best credit card calculators are the credit card payoff calculator, credit card interest savings calculator, and balance transfer calculator from WalletHub because they are free, easy to use, and capable of finding hidden savings. The key is to select the right type of credit card calculator for the objective at hand.

Best Credit Card Calculator to Use, by Situation

If you want to determine what it will take to become debt free: Use WalletHub's credit card payoff calculator.

This type of credit card payment calculator can tell you two things: 1) The monthly payments you'll need to make to rid yourself of credit card debt within a certain amount of time; and 2) How different monthly payment amounts affect the length of time it will take to pay down what you owe.

If you want to see how much you'd save with a lower interest rate: Use WalletHub's credit card interest savings calculator.

A credit card's interest charges stem from its introductory APR and regular interest rate as well as your balance and monthly payment. A credit card interest rate calculator takes all of those things into account and enables you to quickly determine whether getting a lower interest rate will save you a lot of money or not be worth the time and effort.

If you want to see the value of moving existing debt to a new credit card: Use WalletHub's balance transfer calculator.

The cost of a balance transfer depends on a variety of factors, including the size of your balance, the new credit card's transfer fee and 0% term, and how long it will take you to pay down what you owe. Figuring out if a given balance transfer offer will save you money necessitates comparing that cost to what you'd have to pay under the terms of your current account. It's certainly possible to do this by hand, but this type of credit card debt calculator makes it significantly easier.

If you want to know how much debt is truly costing you: Use WalletHub's credit card payoff calculator.

Credit card companies assess interest on a daily basis, which means interest accrues on interest and it is therefore difficult to appreciate the true cost of big-ticket purchases paid off over time. Credit card debt calculators tell you exactly how much interest to account for, making them a valuable tool to use when deciding whether or not you should make a significant purchase now or wait until you have the funds to cover it.

Regardless of your exact need, the best part about WalletHub's credit card calculators is the fact that in addition to crunching the numbers for you, they simultaneously scan more than 1,500 available credit card offers in real-time in order to provide custom money-saving recommendations.

Yes, you should pay more than the minimum on your credit card. While paying the minimum amount due on time every month will keep your account current, paying more than the minimum each month will save you money on interest, improve your credit score, and reduce the amount of time it will take to pay off your debt.

Why You Should Pay More Than the Minimum on a Credit Card

You'll Pay Less in Interest. Unless you're carrying a balance on a credit card with an introductory 0% APR, most of your minimum payment goes toward interest charges, while reducing your balance only by a fraction. You'll owe less interest in the long run by paying more than the minimum payment, and you'll avoid interest charges altogether if you pay the balance in full by the due date every month.

Your Credit Will Improve. Paying more than the minimum amount due will reduce your credit utilization, which is good for your credit score and will make it easier to get credit in the future. Plus, a low credit utilization ratio frees up more of your available credit for emergency use. It's best to maintain a utilization ratio below 30% for these reasons.

You'll Pay off Your Balance in Less Time. When you only make the minimum payment, it can take a long time to pay off your balance in full. New interest charges accumulate daily, and minimum payments only cover a very small percentage of the principal balance.

You can use WalletHub's minimum payment calculator to see how long it will take you to pay off your debt solely with minimum monthly payments. You'll also see how expensive that would be.

Paying The Minimum: Not A Good Long-Term Solution

If you're facing a financial emergency or if you have a credit card with an introductory 0% APR on purchases, paying only the minimum amount could save you money in the short term. Just be sure to make the minimum payment by the due date to avoid potential late fees and damage to your credit score.

As a long-term strategy, however, making only minimum payments every month will do very little to reduce your debt or boost your credit.

A credit card finance charge is the interest charged on a credit card balance and any other fees associated with borrowing money. Typically, a finance charge that appears on a credit card bill is the interest accrued over the course of the last billing cycle. However, a finance charge can also refer to other fees, such as cash advance and balance transfer fees, and sometimes even annual fees. But generally speaking, finance charges in credit card terms refer to interest charges.

The interest included in a credit card finance charge is calculated based on the credit card's annual percentage rate, or APR. There are different APRs for different types of credit card transactions. A regular APR is for general purchases, while balance transfers and cash advances may have their own interest rates.

Having to pay interest on a credit card bill is expensive. But there are ways to avoid getting slapped with a finance charge. If you pay your bill in full every month by the due date - and you don't have any cash advances on your account - you won't accrue any interest due to the grace period that most credit cards give cardholders. That means no finance charges on your bill. However, the first time you carry a credit card balance from billing period to billing period, the balance turns into a revolving debt, and your grace period is forfeited. That means interest will accrue daily until you pay your bill in full two months in a row and get your grace period back.

If you already have a finance charge on your credit card bill and want to avoid paying it, consider calling your credit card company and asking them to waive the charge. Trying this won't cost you anything. And if you don't usually carry a balance on your card, reports online suggest card issuers may be more willing to waive a finance charge.

The most strategic way to use credit card calculators is to make them integral to your credit card decision-making process. In other words, before making any significant decisions relating to your credit card use or spending, first crunch the numbers with the appropriate credit card calculator. This will make it easier to pick the right credit card, set goals, evaluate the efficacy of taking on new debt, and manage your finances better.

For example, you could leverage a credit card interest calculator to determine if it's worth paying an annual fee in return for a lower APR. Similarly, a credit card debt calculator, also known as a payoff calculator, will give you a sense of whether a big-ticket purchase is worth it in light of how much time and money will be required for debt repayment.

The results may surprise you, too. Just consider the fact that it would it take around 10 years for someone with a $2,000 balance and a 15% interest rate to become debt free by only making their monthly minimum payment. And over the course of those 10 years, that person will pay roughly $1,200 in interest.

That, in a nutshell, showcases the utility of a credit card calculator. Too often, people find themselves unable to see the forest (i.e. their overall goals of saving money and providing for a stable financial future) for the trees (i.e. what is convenient or seemingly appropriate at the moment). Most people know that they should pay their credit card bills in full every month, for example, but many assume interest won't be that costly, or at least not worth as much as the purchases they'd like to make now. A credit card calculator, however, can easily translate guesswork into hard numbers, thereby pointing you toward the most cost-effective course of action.

“If you want to be credit card debt-free in X years, use a calculator to figure out how much your payment will be,” said David M. Cordell, a clinical professor of management with the University of Texas at Dallas. “If you can do it, do it! If the pill is too big to swallow, try a longer period of time.”

In order to pay off $3,000 in credit card debt within 36 months, you need to pay $109 per month, assuming an APR of 18%. While you would incur $912 in interest charges during that time, you could avoid much of this extra cost and pay off your debt faster by using a 0% APR balance transfer credit card.

The average length of a 0% APR balance transfer intro period is 13 months, according to WalletHub's Credit Card Landscape Report, and the average balance transfer fee is 2.44% of the transferred amount. Below, you can see how much you could save while paying off $3,000 over different time frames, assuming a 12-month 0% APR period, a 3% balance transfer fee, and an 18% regular APR.

Paying Off $3,000 with a 0% APR Balance Transfer Card

Of course, these aren't the only timelines that you could commit to with $3,000 in debt. To price out more options, try WalletHub's debt payoff calculator. This calculator can also help you decide if transferring the $3,000 in debt to a 0% APR balance transfer credit card would save you money.

The best way to pay off $3,000 in debt fast is to use a 0% APR balance transfer credit card because it will enable you to put your full monthly payment toward your current balance instead of new interest charges. As long as you avoid adding new debt, you can repay what you owe in a matter of months.

Getting a 0% APR credit card isn't the only way to pay off $3,000 in debt, though. In fact, there are many options to consider, each suited for slightly different situations

Ways to Pay Off $3,000 in Credit Card Debt

1. 0% APR Credit Card
2. Personal Loan
3. Debt Settlement
4. Debt Management Plan
5. Bankruptcy

0% APR Credit Card

0% APR credit cards allow cardholders to avoid interest while paying down their debts. These cards can offer 0% introductory periods on new purchases or balance transfers for up to 20 months.

Keep in mind, however, that you may pay a fee for balance transfers, usually around 3% of the transferred amount. Also, if you decide to transfer your debt to one of these credit cards, do your best to pay it off before the typically-high regular interest rate kicks in.

Personal Loan

Personal loans can be used to pay off $3,000 in credit card debt, assuming you can qualify for a big enough loan with a lower interest rate than your current credit card interest rate. This depends heavily on your creditworthiness.

Debt Settlement

Debt settlement is when the debtor negotiates with the creditor to pay a lump-sum that covers less than the total amount of the debt. In return, the creditor will forgive part of the debt, as well as other outstanding fees. This option is good for people who have enough money to make a large payment all at once. When taking this route, just be careful not to overextend yourself financially, or you'll likely just end up back in debt.

Debt Management Plan

Debt management plans allow the cardholder and the lender to amend the original payment agreement by lengthening the repayment term, lowering the interest rate, and perhaps even waiving fees. Each of these modifications is meant to make the repayment process more manageable for the cardholder. Keep in mind, though, that cardholders are still expected to pay the full $3,000 with these plans.

Bankruptcy

Bankruptcy should only be used as a last resort. While declaring bankruptcy may help you clear your debt, it will also damage your credit score for years.

You could save hundreds or even thousands of dollars with a credit card's 0% intro APR offer. This is true for 0% APR offers on both balance transfers and new purchases, though the exact amount you'll save depends on the amount you're paying off and how much you can afford to pay each month.

The tables below use average credit card interest rates, fees, and intro periods to show how much you could save when repaying a debt over the course of three years.

Potential Savings with a 0% APR Offer for New Purchases

Potential Savings with a 0% APR Offer for Balance Transfers

Note: Finance charges assume a 3% balance transfer fee.

Find Out How Much You Could Save

To figure out if a 0% intro rate credit card would save you money, use WalletHub's credit card calculator. And if applying for a new card seems like the right move, check out our top 0% APR picks for 2022.

You can find the Capital One interest calculator here.

Enter your current card balance, APR and annual fee. You can choose to give a value for your monthly payment, or the amount of time to pay down your balance.

This way you can calculate your total interest costs, but also how much time will it take for your card to be paid off at this pace.