How Credit Card Interest (and Minimum Payments) Actually Work
Credit card interest compounds monthly: each billing cycle, the issuer charges interest on your current balance, adds it to what you owe, then applies your payment to the new, larger total. If your payment is large relative to your balance, this barely matters. If it's small — especially if it's close to the minimum — interest can eat most of your payment, and your balance shrinks at a crawl.
The Minimum Payment Trap
Minimum payments are usually set as a small percentage of your balance (often 1%–3%), with a dollar floor so payments don't shrink to nothing on small balances. The problem: as your balance drops, your minimum payment drops too — so the gap between what you pay and what accrues in interest stays thin for a long time. On a high-APR card, paying only the minimum can stretch a balance out for decades and cost several times the original amount in interest. This calculator simulates that scenario explicitly so you can see the real number, not just a warning.
What Happens If Your Payment Doesn't Cover the Interest?
If your planned monthly payment is less than the interest charged in the first month, your balance won't go down at all — it'll grow, even though you're making payments every month. This calculator flags that case directly. If you see it, the priority isn't optimizing your payoff plan; it's increasing your payment (or reducing your rate via a balance transfer or hardship program) until it at least exceeds the monthly interest charge.
How Much Should You Pay Each Month?
As much as you can without compromising other financial priorities (an emergency fund, retirement contributions that get an employer match, or other higher-rate debts). Because credit card APRs are usually much higher than what you'd earn on savings or what most other loans charge, extra dollars toward a credit card balance are often the highest-return use of spare cash you have. If you're juggling several cards or loans and want to figure out which to prioritize, the Debt Snowball vs Avalanche Calculator compares both common strategies side by side.
How This Calculator Works
Both scenarios are simulated month by month. For "Your Plan," interest accrues on the balance, then your fixed monthly payment is applied (capped at whatever's left when the balance is nearly paid off). For "Minimum Payments Only," the same interest accrual happens, but the payment each month is recalculated as the greater of your minimum percentage times the current balance, or your minimum floor — so the payment itself shrinks over time, the way real minimum payments do. Simulations run for up to 50 years; if a balance still isn't paid off by then, results show "50+ yrs" rather than an exact figure.
What This Calculator Doesn't Account For
This tool assumes a fixed APR and that you stop adding new charges to the card. In reality, promotional APRs expire, rates can change, and most people keep using a card while paying it down — all of which would change your real timeline. Treat the results as a baseline for comparing "my plan" against "minimum only," not a guarantee of your exact future statement balances.