Credit Card Interest Calculator: How Much Can You Save?

This credit card payoff calculator will show you how much interest you’re paying and two ways to save thousands

Credit cards can be a life saver when you need emergency cash, but they can also be a slow death for your finances. Making minimum payments usually means you pay double or more what you originally charged over years of credit card bills.

Credit card companies lure you in with rewards programs and low introductory fees. Sure, everyone tells themselves they’ll pay the card off every month but how often does that happen?

Card issuers aren’t going to help. Their business is collecting interest. Making the minimum payment of 2.5% on a $5,000 balance at 18% interest will take you almost 20 years and cost $6,500 in interest alone!

Using a credit card interest calculator to see how much those new designer jeans are going to cost can be a wake-up call to pay off your cards.

This tool will help calculate your credit card interest as well as show you how much you can save by paying a little more each month or lowering the interest rate. I’ve included detailed instructions and how to get the most out of the credit card payoff calculator below so be sure to scroll down.

How to Use the Credit Card Interest Calculator

It’s the credit card company’s business to keep you paying interest. They do this by hiding the true cost of the debt in low monthly payments, introductory rates and cash back.

Using a credit card interest calculator can help you cut through the scam to see the true cost of your cards.

I’ve designed this credit card payoff calculator to be as simple as possible but still give you information you can use.

First, put in how much you owe. This can be on one card or all your credit cards together.

The annual interest rate goes in the box without the percentage sign and as a whole number. For example, 18% interest would be 18.

If you added up all your credit card balances then you should use a weighted average for the interest rate. That means multiplying the rate on each credit card by its percentage of total debt.

For example, if you owe $3,000 on one card at 15% and $2,000 on another card at an 18% rate your weighted average rate would be 16.2%. That’s ($3,000 divided by total debt of $5,000 and multiplied by 15% plus $2,000 divided by $5,000 multiplied by 18%). You can also just use the rate on one card or an average if the debts are close to the same amounts.

Select either a minimum payment percentage or a fixed payment you can pay each month. Most credit cards charge a minimum payment of 2% or $20 each month. This keeps payments super-low but also keeps you paying interest for as long as possible.

Click Calculate Credit Card Payoff.

The interest calculator will show you how long it will take to payoff your credit cards and the total interest you’ll end up paying. This alone can be a huge shock, seeing you’ll be paying the cards for years and losing thousands to interest.

The best part about the payoff calculator is in the next two features. The calculator shows you how much interest you save by adding just $50 to your payment each month.

It will also show you how much you’ll save if you can reduce your rate by 5% with a consolidation loan.

Let’s look at an example using the credit card payoff calculator.

James has $15,000 in total credit card debt on three cards and pays an average of 20% annually. He didn’t mean to rack up so much debt but had a few emergency bills right after losing his job and needed the cards to pay for expenses. He pays 5% of the balance every month to pay them off as quickly as possible.

credit card interest calculator example

Even though Jim is paying way over the minimum payment, it will still take him 152 months, almost 13 years, to pay off the cards. He’ll pay $7,445 in interest – almost half of what he charged in the first place.

This is actually not bad as far as the interest but only because he’s paying so much every month. Making a minimum payment of about 2% on the balance would take more than twice the time and cost more than double what he charged.

Jim can save $4,311 in interest by adding $50 a month to his payments but that might be difficult considering he’s already paying so much each month.

credit card payoff calculator example

With the high rates on his cards, his better option might be to consolidate his credit card debt with a personal loan. By lowering his rate by just 5%, he stands to save over $5,000 on the credit card payoff and can pay the loan back in half the time.

Note: This is only an estimate of how much you’ll save with a personal loan at a rate 5% lower than your current credit card rate. Your actual rate on a loan may be higher or lower compared to credit cards though the average is around 14% for a consolidation loan.

I’ve made this simple loan payoff calculator to find more exact savings on debt consolidation loans. You can also check your rate here to see exactly how much you can save by paying off your cards.

How to Get the Most from Credit Card Payoff

If the balance on your credit cards is under $1,000 then you might be able to just add a little to your monthly payments and pay them off. Anything over that and you could be stuck making payments for a very long time.

Paying off those credit cards, especially if your rates are over 12% APR, should be at the very top of your personal finance goals. Any time you’re paying that much on debt, it’s just a bad situation and that interest is going to weigh you down for years.

There are quite a few reasons to pay off credit card debt beyond just saving money:

  • Credit cards are marked as revolving-debt on your credit report, a bad type of debt because it has no fixed payoff date or payment. Consolidating with a personal loan or just paying off your cards can help boost your FICO by wiping out this bad debt.
  • You never know how much you’ll have to pay or even the rate on a credit card. Rates can jump if you miss a payment and the monthly payment goes up and down with your balance.
  • We use our credit cards for emergencies and some business expenses but keep them under strict lockdown otherwise. Credit cards are just too tempting and make it easy to overspend.
  • Credit cards can get you in trouble faster than you realize and it’s hard to see the real cost. Just one shopping spree could mean years of payments and double the cost of what you bought.

Paying off high-interest credit card debt on their terms is rarely the best answer. Even paying extra on top of the minimum payment will have you paying for years and losing thousands in interest.

That’s the credit card companies’ business, to keep you making payments and them collecting interest.

Using a Consolidation Loan for Faster Credit Card Payoff

A consolidation loan for credit card payoff isn’t for everyone but it can lower your monthly payments and interest rate. That alone can save you thousands in credit card interest but there’s also a few other benefits to consider.

  • Consolidation loans have fixed monthly payments and go on your credit report as non-revolving debt. It’s a better type of debt because you have a payoff date so it can help increase your FICO.
  • Consolidating your credit card balances into one loan can help manage your debt and make sure you don’t forget a payment. The fixed monthly payment also makes it easier to budget each month.

Rates on personal loans vary but are generally below those offered on credit cards. Personal loans still go on your credit report but you don’t have to put up collateral like a mortgage or auto loan. Terms are usually for three- or five-years with fixed monthly payments.

Check your rate on a debt consolidation loan – won’t hurt your credit score

Understand that consolidation loans aren’t just to open up more space on your credit cards to spend more. That can get you in even more trouble and down a road of never-ending interest. Once you pay down your high-interest loans, you can focus more on making your money work for you through investing. Use these investing calculators to see how fast your retirement income can grow.

simple credit card payoff calculator

Credit cards can be a financial tool but they can also be a fast financial trap. Paying off credit cards with minimum payments will mean thousands in interest and years of monthly payments. This credit card interest calculator is your first step in understanding how much you’re paying and how much you can save.