Credit Card Payment Calculator

The credit card payment calculator is a handy device that you can use to compute the monthly payments on your credit card balance. You can use this tool to estimate monthly payments by specifying your payback term, payoff date, or if you would like to know the minimum required monthly payments. Please check out our credit card calculator and credit card minimum payment calculator to understand more.

Read further, and we will show you how to calculate credit card payments, how to use the credit card monthly payment calculator, and how to pay off credit cards fast..

It is always crucial to understand the costs and expenses of a financial service before you sign an agreement. Because of the relatively high interest rates and potential penalties, grasping how credit card payments are calculated and how each payment reduces the balance on your credit card is of particular importance.

Unlike a mortgage or an auto loan, paying off a credit card doesn't follow a predetermined credit card amortization schedule, so you are relatively flexible in planning how to pay off a credit card. The drawback of such flexibility is that you can quickly run into considerable credit card debt.

So, have you ever wondered how to pay down credit card debt, or how to pay off a credit card fast?

The key thing to understand is that it is essential to reduce the principal balance as fast as possible to avoid excessive credit card interest charges or penalties. This way, as you proceed with the payments, the interest is computed on a smaller and smaller amount, so you end up paying less overall.

Now, let's see the three essential steps to make things more straightforward.

1. The Minimum Payment

   In general, credit card providers set a minimum monthly required payment, which is typically low. The less you pay, the larger the part of the payment that is devoted to the monthly interest charges, and so your balance goes down relatively slowly. For example, let's say your card issuer requires you to pay 3 percent of your outstanding balance. If you owe 1,000 dollars on your credit card, the minimum payment is 3 percent of the 1,000 dollars, which is 30 dollars ($1000 × 0.03 = $30).

2. Interest

   Typically, when you make a payment, your credit balance doesn't decrease by the same amount. Instead, credit card issuers allocate part of your payment to cover interest charges accrued in the given billing cycle. For example, if the interest rate, or APR, is 12 percent, the applied monthly interest rate is 1 percent (12% / 12 = 1%). Taking the 1,000-dollar balance, it means that from a 30-dollar minimum payment, 10 dollars ($1,000 × 0.01 = $10) goes to cover the monthly interest charges. You can use our APR calculator to facilitate this calculation.

   Note that card issuers might charge interest daily, which means that interest is added to your balance each day. In this case, you need to convert the annual rate into the daily periodic rate (12 / 365 = 0.0329%) and repeat the process for each day of the month. Because of compound interest, the interest charge will be larger at the end of the month.

3. Principal

   Finally, you can quickly compute the amount by which you reduce your credit card debt in a month. You need only to deduct the 10 dollars interest from the 30 dollars payment ($30 − $10 = $20). In this way, assuming there is no other fee or expenses, you can bring down your 1,000 dollar balance to 980 dollars, which will be the base of the interest calculation in the following month.

For the first step, you need to specify in what context you would like to use to estimate your monthly payments:

• Monthly payment with specified payback term;
• Monthly payment with specified payoff date; or
• Monthly payment with required minimum payments.

After choosing the specification, you will need to set the following parameters.

• Credit card balance — your outstanding unpaid balance.

• Due date — the closest date by which you need to make a monthly payment, and the charged interest is added to your balance.

• APR — the annual percentage rate or yearly interest rate.

• Payback within — the desired payback term (only available for the desired payoff term).

• Desired payoff date — Here you can set the date by which you would like to repay the credit (it is only available for the desired payoff date).

You will receive the following results immediately when you set all the above parameters.

• Repayment details

  You can learn here what is your monthly payment, how long it takes to pay off your credit, what is the total payment amount, and the charged interest.

• Balances

  Here, you can check your credit card balance at a given time, as well as the interest and principal amount you paid based on the repayment term.

• Payment schedule

  The payment schedule shows you the opening and closing balances each month and the monthly payments, broken down into principal and interest parts.

  In the advanced mode, you can set the parameters for the minimum monthly payment requirements and the calculation method the credit card issuer applies.

Most credit card companies calculate interest using the Average Daily Balance (ADB) method. This means they add up your balance for each day of the billing cycle, then divide it by the number of days to find the average. Your interest charge is then calculated based on that average, not just your starting or ending balance.

The formula looks like this:

Monthly interest = DPR × ADB × number of days in billing cycle

In this formula, DPR (Daily Periodic Rate) is your APR divided by 365.

Other ways of calculating interest include:

• Previous Balance Method — Based only on your balance at the start of the cycle.
• Adjusted Balance Method — Payments and credits are subtracted before calculating interest, making it easier to plan a credit card amortization schedule.

Since ADB tracks your balance daily, paying down your debt earlier in the billing cycle can lower your final interest charge!

A credit card balance is the total amount of money you owe on your credit card. It includes all purchases, cash advances, fees, and interest charges. Your balance can change daily as you make new transactions or payments.

Most credit card payments take 1 to 3 business days to be processed. While your available credit might update quickly, the payment can take a little longer to go through officially.

To calculate your credit card payment, follow these steps:

1. Find your current balance and APR (Annual Percentage Rate).
2. Calculate the interest using the Daily Periodic Rate.
3. Add the interest to any required minimum payment.

You should consider the credit card payment calculator a model for financial approximation. All payment figures, balances, and interest are estimates based on the data you provided in the specifications, which are, despite our best efforts, not exhaustive.

For this reason, we created the calculator for instructional purposes only. If you encounter a relevant drawback or inaccuracy, we are always pleased to receive useful feedback and advice.