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How credit card payoff works

Pay a flat $125 a month on a $6,000 card balance at 22.9 percent and it takes 132 months to clear, costing $10,378.84 in interest. Month one charges $114.50 of that $125, so almost nothing touches the debt. Pay $160 instead and the term falls to 67 months.

Time to clear the balance

132 months

11 years at $125.00 a month. Interest takes 92% of that first payment.

Interest in month one
$114.50
Off the balance in month one
$10.50
Total interest
$10,378.84
Total paid
$16,378.84
$
%
$

A payment you hold steady. A required minimum is usually recalculated from the balance each month, so it falls as the balance falls.

On this page

In short

  • On $6,000 at 22.9 percent, a flat $125 a month takes 132 months. You hand over $16,378.84. Interest is $10,378.84.
  • Month one charges $114.50 of interest. Nearly all of the $125 is the interest on the opening balance. The rest is the only principal that month.
  • Raise the payment to $160 and the term falls to 67 months. Total repaid is $10,643.57. Interest is $4,643.57. Month one still charges $114.50.
  • A $110 payment never clears. It does not cover the $114.50 of month-one interest, so the balance grows. The formula has no payoff date to print.
  • This is a closed card with a flat payment. New spending restarts the clock. How credit cards charge interest is the daily-rate version of the same idea.

Almost the whole payment can be interest

A card quotes a nominal annual rate. The monthly rate is that number divided by 12, not the smaller rate that would compound up to it. On 22.9 percent, month one on $6,000 charges $114.50.

Pay a flat $125. After $114.50 of interest, almost none of the payment hits the balance. That is why 132 months, 11 years, are needed, and why you hand over $16,378.84 to clear $6,000. Interest alone is $10,378.84.

The credit card payoff calculator on this page solves for the months from the balance, the rate and the payment you actually send. APR is the quoted rate. Principal is what is left after that month's interest.

How credit cards charge interest is the daily compounding and the grace period. This page is the closed-card payoff.

A larger payment cuts the term in half

Keep $6,000 and 22.9 percent. Pay $160 a month. Month one still charges $114.50, because that line depends on the opening balance, not on what you choose to pay. The extra lands on principal, so month two is charged on a smaller number.

The term falls to 67 months. Total repaid is $10,643.57. Interest is $4,643.57. Paying more each month cut the term from 132 months to 67, and cut the interest from $10,378.84 to $4,643.57. Nothing about the card changed.

This page is one card. Several cards, and a choice of which one the extra hits first, is the debt payoff simulator: the same monthly total, two orders, two interest bills.

A payment below the interest never arrives

Pay $110 on the same $6,000 at 22.9 percent. Month one still charges $114.50. The payment does not cover it. The shortfall is added to what you owe, so month two opens larger than month one.

There is no payoff date. The logarithm in the months formula asks for a negative number. The calculator prints no term because there is not one. A minimum payment that sits under that month's interest is how a balance becomes a permanent fee, not a debt being paid.

A payment that does not cover the month's interest is how a card balance becomes a standing fee. High-cost credit is the same trap on products built so the payment never will: the rate and the term are written that way on purpose.

What this page is not doing

It is not a minimum-payment table from a statement, not new spending, and not a 0 percent promotional rate. The three sheets are $6,000 at 22.9 percent: $125 a month (132 months, interest $10,378.84), $160 a month (67 months, interest $4,643.57), and $110 a month (no payoff). This is educational material, not financial advice.

Worked examples

A flat \$125 a month on a \$6,000 balance

You owe $6,000 on a card charging 22.9 percent. You stop using it and pay a flat $125 every month. How long does it take, and what does it cost?

  1. Find the monthly rate: i=0.229/12=0.01908333i = 0.229/12 = 0.01908333.
  2. Interest for month one is the balance times that rate: 6000×0.01908333=6000 \times 0.01908333 = $114.50.
  3. Compare that with the payment. Nearly 92 percent of the $125 is interest, so the balance falls by less than a tenth of what you paid.
  4. Solve for the months: n=−ln⁡(1−0.01908333×6000/125)÷ln⁡(1.01908333)=131.03n = -\ln(1 - 0.01908333 \times 6000 / 125) \div \ln(1.01908333) = 131.03, so payment 132 is a short final one.
  5. Add up what you actually hand over across those 132 months: $16,378.84.
  6. Subtract the $6,000 you owed to isolate the interest.

It takes 132 months, which is 11 years, with the 132nd payment collecting only the few dollars left. You hand over $16,378.84 to clear $6,000, so the interest alone is $10,378.84, which is 73 percent more than the balance you started with.

The same balance at \$160 a month

Same $6,000 at the same 22.9 percent, but you pay $160 a month instead of $125. What does the extra buy?

  1. Month one interest is unchanged at $114.50. It depends on the balance and the rate, not on what you choose to pay.
  2. The payment is larger, so more of it lands on the balance, and month two's interest is charged on a smaller number.
  3. Solve for the months: n=−ln⁡(1−0.01908333×6000/160)÷ln⁡(1.01908333)=66.52n = -\ln(1 - 0.01908333 \times 6000 / 160) \div \ln(1.01908333) = 66.52, so 67 payments.
  4. Total handed over across those 67 months is $10,643.57.
  5. Subtract the $6,000 balance to isolate the interest.

It takes 67 months, 5 years and 7 months. Paying 28 percent more each month cuts the term almost exactly in half, from 132 months to 67, and the interest drops from $10,378.84 to $4,643.57. Nothing about the card changed. The extra went straight to the balance, and it stopped charging interest from that month on.

A payment that never gets there

Same $6,000 at 22.9 percent, but the payment is $110 a month. When does the card clear?

  1. Interest for month one is 6000×0.01908333=6000 \times 0.01908333 = $114.50.
  2. The payment is $110, which is less than the interest charged.
  3. The shortfall is added to what you owe, so month two opens on a larger balance than month one, and month three opens larger still.

It never clears. $110 a month does not cover the $114.50 of interest, so the balance grows every month however long you keep paying. The calculator shows no payoff date because there is not one to show: the formula asks for the logarithm of a negative number, which has no real answer.

Common questions

Why is month-one interest the same at \$125 and at \$160?

Because that month's interest is the opening balance times the monthly rate. On $6,000 at 22.9 percent it is $114.50 either way. The payment you choose changes how much of that $114.50 is covered, and what the next month's balance is, not this month's charge.

What if I keep using the card?

Then the $6,000 is not a closed balance. New spending adds to what the rate is charged on, and the 132-month figure no longer applies. This page is a payoff from a balance you stop adding to.

Is \$110 below the typical minimum?

The $110 sheet is here to show the line where the payment fails to cover $114.50 of interest, not to match a particular issuer's minimum. A statement minimum can sit above or below that line depending on the balance and the rate.

Keep reading

This page is educational material, not financial advice. The figures come from the formula shown and assume the inputs you enter hold for the whole term. Your own rate, fees, taxes and timing will differ, so treat the output as arithmetic to check a decision against, not as a recommendation.