You may input the current balance, annual percentage rate (APR), and monthly payment for each credit card you possess. Upon entering the balance and APR, you can enter the monthly payment you'd like to make. You can also click the toggle to automatically calculate based on the required minimum monthly payments, which are equal to 1% of principle balance plus interest, and may change every month if balance changes.
Just to the right of the payments field you have the option to input the desired number of months to pay off the debt. This option will show you what your monthly payment should be to achieve your desired debt-free date.
When you click the calculate button, you’ll see several things to help inform your debt payoff strategy, including:
- The monthly payment
- The number of months it’ll take to pay off the debt
- The total interest you’ll pay
- Total payment amount, including interest and principal
Please input the outstanding debt amount you aim to settle. For instance, when settling credit card debt, you may access the balance by logging into your credit card account or viewing the latest billing statement.
In case you hold a balance on multiple credit cards and intend to merge the balances onto one card, you can list the cumulative balances in this section. However, if you intend to settle the cards individually, calculate each card separately since they may have varying interest rates.Estimated interest rate
The interest rate signifies the cost of borrowing funds, expressed as a percentage. However, the annual percentage rate (APR) on a loan varies from the interest rate, as it encompasses the amount borrowed and additional fees. On a credit card, the APR is the yearly interest rate. In the calculator, using the estimated APR instead of the interest rate will generate a more accurate monthly payment estimate.
Take note of the possibility of varying interest rates for purchases, balance transfers, and cash advances on your credit card. By reviewing your recent credit card statement, you can identify which rate applies to most of your balance. When you have two large balances on your credit card with varying interest rates, it's advisable to run those balances separately on the calculator.
Additionally, if you miss a credit card payment, a penalty APR may be charged, which could unexpectedly increase your interest fees.
You may find your credit card's APR by logging into your account and examining the card member agreement, terms, and conditions, or the latest billing statement. In the case of a loan, the APR should be stated in the loan documents.Expected monthly payment
You can use this field to enter the amount you plan to pay each month towards your credit card debt, whether it's just the minimum payment or a higher amount. This will help estimate how long it will take you to pay off your debt. However, if you have a specific deadline or number of payments in mind for paying off your debt, you can leave this field blank.Desired months to pay off
Input the duration, in months, within which you intend to pay off your debt. If you plan to pay off your credit card debt within the next year, then enter "12 months" in this field to calculate the monthly payment needed to reach your goal. If you’d like to payoff the debt sooner, then choose a more ambitious monthly target and see what your monthly payments should be to achieve them.