Question 1

How long does it take to pay off a credit card with minimum payments?

Accepted Answer

Paying only the minimum payment (typically 1-3% of the balance) can take decades to pay off a credit card. For example, a $5,000 balance at 20% APR with a 2% minimum payment would take over 30 years and cost more than $8,000 in interest. Paying even a fixed amount above the minimum dramatically reduces payoff time.

Question 2

What is the avalanche vs. snowball method for credit card debt?

Accepted Answer

The avalanche method pays off the highest-interest card first, minimizing total interest paid. The snowball method pays off the smallest balance first, providing psychological wins. Mathematically, the avalanche method saves more money, but the snowball method can be more motivating for some people. Either method beats paying minimums only.

Question 3

How is credit card interest calculated?

Accepted Answer

Credit card interest is calculated daily using your Annual Percentage Rate (APR) divided by 365. Each day, your balance is multiplied by the daily rate. Interest is then added to your balance at the end of each billing cycle. This is why carrying a balance from month to month is so costly -- you pay interest on interest.

Question 4

What is a good credit card APR?

Accepted Answer

As of 2024, the average credit card APR is around 20-21%. Cards for excellent credit (750+) may offer 15-18% APR. Rewards cards typically have higher rates (20-25%). Store cards often have the highest rates (25-30%). If you carry a balance, APR is critical -- a 0% intro APR balance transfer card can save significant money while paying down debt.

Credit Card Payoff Calculator

Frequently Asked Questions

Related Calculators