Credit Card Pay-off Calculator

Ever wondered what it might take to become free of the credit card debt? Or how long it will take to pay off the balance of a credit card with and without making additional monthly payments? or what to do to pay off credit card debt faster? The Credit Card Payoff Calculator for Microsoft® Excel® and OpenOffice can help to find an answer to a few of this questions and easily can be the first step to your debt reduction. This calculator is the first one in the series of debt reduction calculators provided by Spreadsheet123.

This credit card debt reduction calculator uses multiple line credit approach, which is defined as cash advance balance and the balance on purchases, both of which are usually charged at different interest rates (APR). The calculator helps to solve for minimum monthly payments as well as a minimum plus interest payments with the ability to include additional monthly amounts. It can also solve for a time to pay off if making only minimum payments.

Learn how to calculate interest on credit card balance? and read our tips on how to avoid a credit card debt?

Below on this page, we also describe the methods of calculating the interest and provide more details about how to calculate the minimum payment on the credit card.

With the help of this calculator, it will be much easier to figure out the ways to ultimately pay off your credit card debt and helps to understand just how much it can cost you in interest.

This credit card pay-off calculator for excel is a pretty simple spreadsheet that can solve for minimum monthly payments, for a time to pay off, for total interest as a sum of both interest on cash balance and balance on card purchases. This all will help in getting the answer to the question of how long it takes to pay off your credit card balance by making only minimum payments.

The calculator also lets you enter the constant additional monthly amount, that can be paid as an addition to the minimum monthly payments you make or to make less frequent payments along with minimum payments instead, to see how those payments can affect the time of pay off. The spreadsheet will also introduce you to the methods of a PPI (Payment Protection Insurance) deductions and the effect of your PPI on the balance of a credit card and the interest.

Detailed payments schedules and charts provide comprehensive information and schedules for all, calculated interest, minimum payments, additional payments, principal and PPI where applicable.

Instructions on how to use this calculator provided within a calculator itself, in the form of links to the topics and also as popup comments and are always available as you go along.

How to calculate Interest on balances of the Credit Card?

What is APR and EAR?

APR (Annual Percentage Rate) is a rate provided to the consumer for any balance borrowed from Credit Card. The most common way used to calculate your interest is a daily compounding of the interest based on daily closing balance. This explains the fact as to why your interest differs from month to month.

EAR (Effective Annual Rate) is a more direct reference for the one-year rate of interest. The formula to calculate EAR is: EAR=((1+APR/N)^N)-1 where N is the number of compounding periods. Let's say that the interest is compounded daily and APR is 16.9% than EAR will look like this EAR=((1+16.9%/365)^365)-1 and will be 18.41% or if the interest is compounded monthly then EAR=((1+16.9%/12)^12)-1 and will be 18.27%.

Methods of Calculating Interest

Average Daily Balance

There are a few ways to calculate an interest on the credit cards, but most commonly use is the Average Daily Balance method. This is a sum of the daily balances divided on the number of days within the given charging cycle to get an average daily balance, which is then multiplied by an APR divided on the number of cycles within a year which is usually 12.

This is a pretty good way of calculating your monthly interest, but may not be the exact reflection of what you get on your monthly statements.

Daily Accrual

There is also a Daily Accrual method that is commonly used in the UK. This method is similar to the one explained above with difference of calculating interest for the daily balance and compounding it to a periodic (usually monthly) charge. In this method, each days closing balance is multiplied on the APR divided on 365 days to calculate daily interest charges. Then all of the daily interest sums are added together.

The formula to calculate daily accrued interest for the period looks like this:

Calculation of the monthly interest charges with this method will depend on the number of days within a billing cycle, changes in daily balance and APR.

The calculator above allows for two lines of credit, and therefore calculation of the interest also spreads on two tracks, that is the calculation of interest on the balance on purchases plus interest calculation on the cash balance, which is usually much higher.

How to calculate the minimum payment on credit card?

The minimum payment is the required by the bank sum, that is determined by the percentage of the borrowed amounts from the balance of the credit card and stands at usually 2-5%. As standard, banks require between 2 to 5% of the outstanding balance paid on a monthly basis along with interest or it can also be a fixed amount of dollar for a low balance, which usually is $15.00 for US and Canada and about £5.00 on most credit cards in the UK, and calculated on the principal whichever is greater.

Ways of calculating a minimum payment are pretty simple. It is a multiplication of the remaining balance on the minimum percentage (2-5%) required for paying, which is higher than the sum of interest to cover the partial principal payment. The calculator above has an option to define a minimum only or a minimum plus interest option to pay.

Fixed Payments on Low Balance is paid when the minimum payment, which usually between 2 and 5% of the balance are lower than that fixed payment amount, which is $15.00 for US and Canada or £5.00 for the UK on most Credit Cards. In other words, the minimum amount required to be paid towards principal is between 2 to 5% of the balance of the credit card. The fixed amount will be paid only when the minimum amount, calculated as a percentage of the balance will become equal to or lower than that fixed payment amount.

Principal Payment Distribution.

Principal Payment distribution is a distribution of the principal payment on two lines of credit described as balance on purchases and a cash balance of the credit card. Because of the difference in interests for this balances, most banks usually leave cash balance payments right until the very end of clearance of the balance on purchases or may only allocate a tiny portion of principal towards those cash balance repayments. You can change this by changing the value of the cell named "Principal Payment Distribution" by changing the percentage of allocation that it usually varies between 0% and 15% depending on your credit cards agreement.

Fixed amount and Additional Payment.

A fixed amount can be any amount that you can pay, but it must be equal to or higher than the first-month payment amount. Making fixed monthly payments will make a significant difference in the number of payments, and total interest paid, this will let you pay your credit card balance much sooner and for sure save some interest too. Do not get confused by definition of a Fixed Payment and Fixed Payment on low balance, since these two are entirely different payments.

Additional payments are usually the payments that are made occasionally. Depending on the sums paid this can also be a big difference to the paid interest amounts as well as reduction of the number of payments. Both methods can be used with our calculator.

Payment Protection Insurance Payments.

Payment Protection Insurance, also known as PPI is a product that is being sold to you by your bank when you take a loan or credit card. Depending on the agreement PPI will either be deducted from your credit card balance or can be added to your monthly payment. There is a big difference in between if your PPI premium is deducted from your credit card balance, which is usually considered as a standard purchase with your credit card as if you were shopping with it. This means that you will also be charged interest for this and if you are making only a minimum payment, you will not be able to cover your credit card balance at all. If you PPI is added to the monthly payment then your monthly total payment will be higher, but at least you can avoid spending your credit card balance and pay extra in interest. PPI offered by any bank is almost always a lot higher than if purchased identical product from an independent insurance broker, remember to read a small print on your credit card agreement to make a right decision before purchasing.