21.59%
Average US credit card APR (2025)
~18 yrs
Time to pay off $5,000 at minimum payments (21% APR)
$4,200+
Interest on $5,000 paid with minimums over 18 years
Daily
How credit card interest compounds
How credit card interest is calculated
Credit cards use a daily periodic rate (APR ÷ 365) applied to your average daily balance. This means interest compounds daily — you're charged interest on the previous day's balance including any interest already accrued. The statement balance is then your total at the billing cycle close, which you either pay in full (no interest) or carry forward (interest applies).
Avalanche vs. snowball method
- Avalanche method: pay minimums on all cards, put extra money toward the highest-APR card first — mathematically optimal, minimizes total interest paid
- Snowball method: pay minimums on all cards, put extra money toward the smallest-balance card first — produces quick wins that build motivation
- Avalanche saves more money; snowball often leads to better follow-through for people who need psychological momentum
- For one card: pay as much above the minimum as possible — both methods are identical
- Our calculator compares both so you can see the dollar difference in interest and months to freedom
How to use the credit card payoff calculator
- Enter the balance, APR, and minimum payment for each card
- Enter your total monthly payment budget across all cards
- Compare avalanche vs. snowball results: total interest and payoff date
- Adjust your monthly payment to see how extra payments shorten the timeline
- Find the break-even payment that produces a payoff date you can commit to
💡 The minimum payment trap
Credit card minimums are typically 1–3% of your balance, designed to keep you indebted as long as possible. Adding just $50–$100/month above the minimum on a $3,000 balance at 21% APR can cut your payoff time from 14 years to under 3 years and save over $3,000 in interest.
Common mistakes to avoid
- Making only the minimum payment — you're largely paying interest with minimal principal reduction
- Closing paid-off cards (it reduces your available credit and can hurt your credit score short-term)
- Ignoring balance transfer opportunities — a 0% promotional period can freeze interest and accelerate payoff
- Starting a new purchase on a card with a balance — new purchases often accrue interest immediately
- Not attacking debt while simultaneously saving at a lower rate than your card charges
Related calculators
Use the Debt-to-Income Ratio Calculator to see how your credit card minimum payments affect your mortgage qualification. The APR Calculator helps you understand the true cost of any balance transfer offer. And tracking your progress in the Net Worth Calculator shows how paying off credit card debt directly improves your financial picture.