Maryland credit card payoff calculator

The one thing this tool does that others do not

If the payment you enter is at or below the interest charged that month, the calculator does not give you a payoff date. It says the balance never clears, shows the interest being added each month, and tells you the smallest payment that would start making progress.

That is deliberate. Run the arithmetic on a payment slightly below the monthly interest and the honest output is a negative or infinite number of months. Many calculators round that into something like "412 years", which reads as an answer and is not one. Saying the balance never clears is the same fact stated in a way a person can act on.

The threshold is simple. Monthly interest is the balance multiplied by the APR, divided by twelve. Pay more than that and the balance falls. Pay less and it grows.

A worked example, using the tool's own defaults

The calculator opens on a $6,500 balance at 24.99% APR with a $250 monthly payment.

Read the first and last lines together. In month one, $135 of the $250 payment goes to interest and $115 reduces the balance. Over the whole term you repay $6,500 of borrowing and hand over $3,000 for the privilege, which is close to half the balance again.

What happens if I only pay the minimum?

On this balance, at this rate, try $135 or less as the payment. The tool stops and tells you the balance never clears, because at $135 the interest charged each month is at least what you pay. The minimum it suggests to make progress is $137, and even that clears the balance so slowly the term is measured in decades.

This is not a hypothetical. A typical card minimum is a small percentage of the balance plus interest and fees, and it is designed to keep the account current, not to retire the debt. As the balance falls, the minimum falls with it, which stretches the term further.

The practical rule: fix the payment in dollars and never let it fall as the balance does. A payment held flat at $250 is what produces the three-year term above. A payment that shrinks each month does not.

The boundary, worked out

The refusal has a precise edge, and it is worth seeing where it sits. On the default balance, $6,500 at 24.99%, the interest in the first month is $135.36.

One dollar separates the first row from the second, and the second row is not a good outcome. At $136 a month the balance clears in the way a leaking boat reaches shore: technically, eventually, and at a cost of nearly $29,000 of interest on $6,500 of borrowing.

That is the real lesson of the refusal. The problem is not only the payment that fails the test. It is the whole band just above it, where the arithmetic works and the answer is still no.

If your payment sits in that band, the useful moves change the inputs rather than the patience: lift the payment until interest is a minority of it, stop the interest with a promotional rate, or replace the debt with a lower-rate fixed loan.

What moves the payoff most, in order

1. The payment. By a wide margin, and the effect is front-loaded. Going from $200 to $250 saves about $1,500 of interest on this balance; going from $300 to $350 saves about $600, because the balance is already clearing quickly.
2. Whether you keep using the card. New spending is a fresh balance at the full rate with no grace period, and it resets the term. The model assumes none, which is its most fragile assumption.
3. The rate. Real, but smaller than the payment. On $6,500 paying $250, moving from 29.99% to 19.99% shortens the term from about three years and seven months to about two years and eleven months and saves roughly $2,000.
4. The balance. Fixed at the moment you start, which is why the three above it are where the decisions actually are.

Where does the interest actually come from?

Three details that change the number and are not on the front of the statement:

• The grace period only exists if you pay in full. Pay the statement balance in full each month and new purchases are interest free. Carry any balance and most cards charge interest on new purchases from the day of the transaction.
• Cash advances and balance transfers are separate. They usually carry their own higher rate from day one, with no grace period at all. A card showing one APR on the front may be running three.
• Payments above the minimum go to the highest rate. This is required by law. Anything up to the minimum is applied at the issuer's discretion, which in practice means to the cheapest balance. So a cash advance sitting behind a promotional balance can be very hard to shift on minimum payments alone.

Our explainer on how credit card APR works goes through how the daily periodic rate produces the monthly charge.

The way out when the payment is not enough

If the tool tells you the balance never clears, a bigger payment is one answer and it is not always available. The other answer is to stop the interest.

A balance transfer card with a 0% introductory period does exactly that: for the length of the promotion, every dollar you pay reduces the principal. The arithmetic changes completely. On the example above, $250 a month against $6,500 with no interest running clears the balance in 26 months rather than 38.

Two conditions attach. There is normally a transfer fee of 3% to 5% of the amount moved, which is a real cost even though it is not interest. And the promotional rate ends on a fixed date, after which the standard rate applies to whatever is left, so the plan only works if the payment is set to clear the balance inside the promotional window. Our roundup of balance transfer cards sets out what to compare.

A consolidation loan does something similar at a lower rate than a card, without the promotional deadline. Personal loan against credit card sets out that comparison.

How the issuer works out the charge, and how to check it

The APR on the front of the statement is an annual figure. The charge is worked out daily. The issuer converts the APR into a daily periodic rate, applies it to the balance on each day of the cycle, and bills the total. That is why a payment made early in the cycle costs less interest than the same payment made on the due date, and why the single monthly figure this tool prints is a close approximation rather than the exact charge.

Four lines on a statement are worth reconciling against what you see here:

• The interest charged for the period. Compare it with the interest this month alone figure. A gap usually means more than one balance is running at more than one rate.
• The balance breakdown. Purchases, cash advances and any promotional balance are listed separately with their own APRs. A single blended rate cannot represent that, and the highest of them is the one to attack first.
• The minimum payment disclosure. Statements carry a required box showing how long the balance takes to clear at the minimum and what that costs. Read it against the term you get here at a fixed payment. The difference between the two is what holding the payment flat is worth.
• Fees. Late charges, annual fees and cash advance fees are added to the balance and then earn interest like everything else. None of them appear in this model.

The mistakes that keep a balance alive

Paying the minimum while still using the card. The balance never moves and it feels like it should.

Treating a balance transfer as a payoff. Moving the debt is not repaying it. If the payment does not change, the promotional period simply delays the problem and adds a fee.

Closing the card as soon as it hits zero. That can raise your utilisation ratio and shorten your average account age, both of which affect scoring. See how credit scores work.

Waiting for a windfall to clear it in one go. A fixed payment starting this month beats a larger payment that starts eventually.

Check these on this month's statement

The statement carries every input this tool needs, and one disclosure most people never read.

• Read the minimum payment disclosure box and note the years and the total cost it prints at the minimum.
• Compare the interest charged for the period on the statement with the interest this month alone figure above.
• Write down each balance segment separately, purchases, cash advances and any promotional balance, with the APR shown against each.
• Check whether the APR is variable, and find the index it moves with in the cardholder agreement.
• Set a fixed dollar payment by standing order rather than the minimum, so the amount does not shrink as the balance falls.
• Add up any late charges, annual fees and cash advance fees on the statement, because none of them are in this model and all of them earn interest.
• If a transfer is on the table, get the fee percentage and the date the promotional rate ends in writing, then check your payment clears the balance before that date.

What the calculator assumes, and where that breaks

Its own caveats are the honest list:

1. The rate holds and nothing new is charged to the card. Both are optimistic. A variable APR moves with the prime rate, and a single new purchase resets the arithmetic.
2. Payment allocation above the minimum goes to the highest rate. True by law, but only above the minimum.
3. Cash advances and transfers carry their own rate. A single blended APR cannot represent a card running several.

Two more from the arithmetic itself. It assumes one payment a month on schedule, so it does not show the benefit of paying twice a month, which reduces the average daily balance slightly. And it treats the final month as a full payment, so the total paid is a few dollars above what you would actually hand over. Neither changes the decision.

It also knows nothing about fees, late charges or penalty APRs, all of which make a real balance worse than the model. Every tool on the site is listed in the calculator index.