The Credit Card Minimum Payment Calculator is a financial utility designed to project the amortization schedule of revolving credit debt when only the minimum required payment is made. Unlike fixed-term loans, credit cards often employ a “percentage of balance” minimum payment structure, or a fixed floor, which can significantly prolong the repayment period due to the accumulation of compound interest.

Understanding the trajectory of debt repayment is critical for financial health. This tool simulates a “fixed payment” strategy based on the initial minimum requirement to demonstrate the most optimistic payoff timeline, assuming the borrower does not reduce their payment as the balance decreases.

1 Calculator

2 Mechanics of Interest

Credit card interest is typically calculated daily based on the average daily balance, but for estimation purposes, it is often modeled monthly. When a consumer pays only the minimum, a significant portion of that payment goes toward covering the accrued interest rather than reducing the principal.

If the calculated minimum payment is less than the interest accrued in a billing cycle, the debt enters a state of negative amortization, where the balance grows despite payments being made. This calculator prevents that scenario by alerting the user if the input parameters result in an infinite payoff loop.

For those considering consolidating high-interest debt, tools like a Personal Loan EMI Calculator can help compare the cost of a fixed-term loan versus continuing with revolving credit payments.

3 Mathematical Model

The iterative process used to determine the payoff timeline is based on the following recursive logic, applied monthly until the balance reaches zero:

Where APR is the Annual Percentage Rate. Note that this formula is distinct from a Mortgage Amortization Schedule, which calculates the payment required to hit a specific date. Here, the payment is fixed by the initial percentage, and the date is the variable result.

4 Strategic Implications

Paying only the minimum is widely considered a “debt trap.” The chart generated above often reveals that the total interest paid can exceed the original purchase price of the items bought.

• The Snowball Effect: As principal decreases slowly, interest continues to accrue on the remaining bulk.
• Fixed vs. Declining Payments: Most credit card issuers lower the minimum payment as the balance drops. If a borrower follows the issuer’s minimum (rather than the fixed amount shown in this tool), the payoff time will increase exponentially, often taking decades.