A Really Simple Credit Card Payoff Calculator

Getting out of credit card debt is a worthy goal. It can also be quite a challenge. This credit card payoff calculator will help you by calculating how long it will take to pay off your credit card debt given a set monthly payment.

How to Use the Credit Card Payoff Calculator

The calculator requires just three fields:

Outstanding Balance: This is how much you still owe on your credit card debt. If you have balances on multiple cards, you can evaluate them one at a time with this calculator. Alternatively, you can add the balances together and use the total.
Interest Rate: The interest rate is the rate charged by your credit card company. If you combine multiple balances from several cards, use a weighted average of the interest rate.
Monthly Payment: This is the amount you plan to pay toward your credit card debt each month. Note that this is not the same as the credit card's required minimum payment.

The results show you approximately how long it will take you to pay off your credit card debt. The calculator displays this information in both months and years. It also shows you how much interest you will have paid during this time.

How to Lower Your Credit Card Interest Rate

A key element in getting out of credit card debt is the interest rate. Most credit cards charge double-digit interest rates, some exceeding 20%. One way to reduce interest charges is to use a 0% credit card. These cards enable you to transfer high-interest balances to cards that charge no interest for 15 months or longer.

How to Get Out of Credit Card Debt

There are two basic approaches to paying off any debt, including credit card debt: The Debt Snowball and the Debt Avalanche. Yes, the terminology is a bit goofy, but the concepts are powerful.

With both the Debt Snowball and Avalanche methods, you'll continue to make the same monthly payment until you're debt-free. That's true even though the required minimum payment will go down each month as your balances decline. Where these two methods differ is in how you determine which credit card to pay down first.

To be clear, you'll continue to make the required minimum monthly payment on all your cards. After all, you don't want to incur penalties for missing a payment or negative marks on your credit report. The question then becomes which credit card do you apply any extra payments to first. It's this question that the Debt Snowball and Avalanche methods attempt to answer.

The Debt Snowball

With the Debt Snowball, the extra payment over and above the minimum required payment goes to pay down the credit card with the lowest balance. With the Snowball Method, you ignore the interest rates. Why?

The theory is that by paying down your lowest balance card first, you pay it off in a short amount of time (at least compared to tackling a larger debt). This, in turn, will motivate you to continue getting out of debt. Some studies back up this approach.

The Debt Avalanche

With the Debt Avalanche, you focus on the debt with the highest interest rate. This could also happen to be the debt with the smallest balance. In that case, there's no difference between the Avalanche and Snowball methods. In other cases, however, the high-rate debt could also be the debt with the highest balance.

The goal here is to get out of debt the fastest and for the least amount of interest. In the end, the “best” approach is the one that works for you.