Your Payoff Plan
Educational estimate only. Real card terms vary (fees, variable or promotional APRs, daily compounding). Not financial advice. CustomBank is a banking simulator, not a real bank.
How Credit Card Interest & the Minimum-Payment Trap Work
Credit cards charge interest on the balance you carry, and that interest is added back to your balance so it compounds. Paying only the minimum keeps the balance high, so most of your payment goes to interest instead of the amount you actually owe.
Learn more about APR, Compound Interest, Loans, and Credit Score in our banking glossary.
Credit Card Payoff Questions
Most cards apply a daily periodic rate (your APR divided by 365) to your average daily balance, so interest compounds day by day. This calculator uses a simplified monthly rate (APR divided by 12) on the outstanding balance to give an easy-to-follow estimate of your payoff timeline and interest.
Minimum payments are usually the greater of a small fixed amount (often about $25) or roughly 1 percent of your balance plus that month's interest. Because the payment shrinks as your balance falls, paying only the minimum can stretch repayment over 15 years or more and multiply the total interest you pay.
Yes. Every dollar you pay above the month's interest charge goes straight to your principal, which lowers the interest charged next month. Even a small fixed extra amount each month can cut years off repayment. Raise the monthly payment in the calculator to see the difference.
No. This is a free educational estimate to help you learn how credit card payoff works. Real card terms vary (fees, variable or promotional APRs, and daily compounding), so your actual numbers will differ. CustomBank is a banking simulator for financial literacy, not a real bank, and this is not financial advice.
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