How debt payoff is calculated
Each month, interest is charged on the outstanding balance at the monthly rate (APR ÷ 12), then your payment is subtracted. The number of months to clear the debt is:
n = −log(1 − B·r ÷ P) ÷ log(1 + r)
- B — current balance; r — monthly rate (APR ÷ 12); P — monthly payment
If P is less than or equal to B × r, the payment only covers interest and the debt never shrinks — the calculator warns you when this happens.
Worked example
A $5,000 card balance at 22% APR with $150 monthly payments takes about 4 years 4 months to clear and costs roughly $2,750 in interest. Raising the payment to $250 clears it in about 2 years and cuts interest to around $1,200.
Key terms
- APR
- Annual percentage rate — the yearly cost of borrowing. Credit cards apply it monthly to your balance.
- Minimum payment
- The smallest payment your card issuer accepts. Paying only the minimum can stretch repayment over decades.
- Avalanche method
- Pay minimums on all debts and put extra money toward the highest-APR debt first. Saves the most interest.
- Snowball method
- Clear the smallest balance first for quick wins, then roll that payment into the next debt.
- Balance transfer
- Moving debt to a card with a 0% promotional rate. Watch for transfer fees, typically 3–5%.