1. What is Credit Card Amortization?

Credit card amortization is the process of paying off debt with regular payments over time, where each payment covers both interest charges and principal reduction. This calculator shows how each payment is allocated between interest and principal.

2. How Does the Calculator Work?

The calculator uses these amortization formulas:

Where:

• Outstanding Balance — Remaining principal at start of month ($)
• R — Monthly interest rate (APR / 12, as a decimal)
• D — Monthly payment ($)

Explanation: Each month's payment first covers the interest due, with the remainder applied to reduce the principal balance.

3. Importance of Payment Schedule

Details: Understanding your amortization schedule helps you see how much interest you'll pay over time and how increasing payments can reduce both the payoff period and total interest.

4. Using the Calculator

Tips: Enter your current credit card balance, APR, and your planned monthly payment amount. The calculator will show how long it will take to pay off and the total interest paid.

5. Frequently Asked Questions (FAQ)

Q1: Why does most of my payment go to interest at first?
A: With credit cards, interest is calculated on the current balance. Early in repayment when the balance is highest, most of your payment covers interest.

Q2: How can I pay off my credit card faster?
A: Increasing your monthly payment, even slightly, can significantly reduce both your payoff time and total interest paid.

Q3: What's the difference between APR and interest rate?
A: APR includes both the interest rate and any fees, giving a more complete picture of borrowing costs.

Q4: Should I pay more than the minimum payment?
A: Absolutely. Minimum payments often cover mostly interest, leading to much longer payoff times and higher total interest.

Q5: How does compound interest affect my payments?
A: Credit cards typically use daily compounding interest, which is why paying early in the billing cycle can reduce interest charges.