Credit Card Payoff Calculator

When you only make minimum payments on high-interest debt (like credit cards), most of your payment goes toward interest rather than reducing your principal balance. Here's how paying extra makes a big difference:

• Direct principal reduction: Every dollar above the interest charge goes straight to reducing your debt principal
• Compound interest works in your favor: With a lower principal, less interest accrues each subsequent month
• Faster payoff timeline: Even small additional payments can shave months or years off your repayment period
• Substantial interest savings: You might save hundreds or thousands in interest charges over time

Example: On a $5,000 credit card balance at 18% APR, paying just $25 more than the minimum each month could save you $1,200 in interest and help you pay off the debt 3 years faster.

These are two proven strategies for paying off multiple debts, each with different advantages:

Hybrid Approach: Some people combine methods - paying off one small balance first for motivation, then switching to the avalanche method for maximum efficiency.

While any amount helps, these guidelines can maximize your progress:

• Starter goal: Aim to pay at least the interest charge plus 1% of your principal each month
• Aggressive payoff: Try to double your minimum payment if possible
• Windfall strategy: Apply at least 50% of any unexpected money (bonuses, tax refunds) to debt
• Percentage approach: Allocate 15-20% of your take-home pay to debt repayment

Use a debt payoff calculator to see how different payment amounts affect your timeline and interest costs.

This depends on your interest rates and financial security needs:

• High-interest debt (>7% APR): Focus primarily on debt payoff after building a small emergency fund ($1,000)
• Moderate-interest debt (5-7% APR): Balance between debt repayment and savings
• Low-interest debt (<5% APR): May make sense to prioritize other financial goals
• Essential: Always maintain at least 1 month's worth of minimum payments as a buffer

The ideal approach balances debt reduction with financial safety nets to avoid new debt from emergencies.

If you're stuck at minimum payments, consider these options:

1. Reduce expenses: Cut discretionary spending or negotiate bills
2. Increase income: Take on side work or sell unused items
3. Balance transfer: Move high-interest debt to a 0% APR credit card (if you qualify)
4. Debt management plan: Work with a nonprofit credit counseling agency
5. Debt consolidation loan: Combine multiple payments into one with lower interest

Remember that paying just the minimums means you'll pay significantly more interest and take much longer to become debt-free.