Because interest rates tend to be considerably higher for credit cards than the secured debt associated with car and home loans, you’ll likely want to pay off credit card debt first. Compiling the necessary monthly payments to make that happen can help you fine tune your budgeting. Use our Credit Card Payoff Calculator to help you understand the steps that can help you eliminate a credit card debt, or just get closer to zero.
Credit Card Payoff Definitions
Credit card balance – The total amount owed on your credit card. New charges may not be added until 24 hours after a purchase, depending on the credit card holder and method of payment involved.
Annual credit card interest rate – Most U.S. credit cards are quoted in terms of nominal annual percentage rate (APR) compounded daily, in a range of 7 to 36%. Note that the holder may change the interest rate over the course of your credit card agreement if you’ve had the card a year or more, a promotion is ending, you’re late with payments, your credit score has dropped substantially or you’ve signed up for a variable interest rate.
Total interest – The amount of interest you’ll pay in the time it takes you to pay off your credit card debt.
Amortization table – This graph can be created to track the reduction of your credit card debt as you make monthly payments, separating your expenditures on principal versus interest.
Additional spending – Any amounts charged to your credit card on top of your existing debt must be added directly into required payments each month if your payoff plan is to remain unaffected.