Interest
How interest works on a payoff plan
A credit card does not wait until the end of the year to charge interest. Most issuers convert the APR into a monthly rate and apply it to the remaining balance. PayoffPlan uses that simple monthly model so you can see why a minimum-only habit lasts so long.
From APR to a monthly charge
Monthly rate = APR ÷ 12. A 24% card is 2% per month. On a $1,000 balance that is about $20 of interest before you send a payment. The tool rounds that charge to the nearest cent.
After interest is added, the payment comes off the new balance. If you pay $25, only $5 reduced principal that month. The rest rented the balance.
Why minimums move so slowly
Card minimums are often a small percentage of the balance, or a fixed floor such as $25 or $40. When the minimum sits close to the monthly interest, almost nothing is left for principal. That is the stall: you are current, and the debt barely shrinks.
What this calculator does not do
- Daily balance or average daily balance methods used by some issuers
- Grace periods on new purchases when you pay in full
- Penalty APRs, late fees, or over-limit fees
- 0% promo cliffs, deferred interest, or variable-rate resets
Those details can change a real statement. Treat the schedule as a planning sketch, then read the issuer’s “how we calculate interest” box on the statement PDF.
A budget that is too small
If the monthly cash is less than the interest, the balance grows even if you never spend again. PayoffPlan flags that. Raising the payment, cutting an APR (refinance, hardship program), or pausing new charges is the only way the line bends down. That is a description of the math, not a recommendation.