Why does credit-card debt barely fall even when you pay every month?
Only the part of a payment remaining after interest reduces principal in the simplified model. A small fixed payment can therefore produce very slow progress.
Credit card payoff calculator →Inspect the principal component
The credit-card tool models a fixed monthly payment. It does not reproduce an issuer’s minimum-payment formula, which can depend on contract terms and the composition of the balance. An amount entered into the calculator should not be interpreted as the minimum the issuer permits. Read the statement’s required payment and due date separately.
Calculate the first month
Start with a 5,000 balance and select the monthly approximation of a nominal 24% annual rate divided by twelve. The monthly rate is 2%, so first-month interest is 100. Paying 150 reduces principal by only 50 and leaves 4,950. Paying only 100 would not reduce principal at all in this model. These figures explain the opening month rather than claiming that every credit card calculates interest monthly.
Check additions outside the model
New purchases, cash advances, fees, penalty rates and balances with different rates can alter the actual statement. The tool assumes no new spending, a fixed payment and an unchanged rate; select the appropriate daily convention for a daily-accrual product. If the payment cannot amortize the balance, an error is a reason to inspect the assumptions rather than evidence that the calculator should manufacture a payoff date.
Try the calculators
- Credit card payoff calculator
Estimate payoff time, interest and a schedule for fixed monthly payments.
- Loan calculator
Compare terms and see what borrowing will cost.
- Simple interest
Calculate interest without compounding.