function calculateCreditCardInterest() {
var currentBalance = parseFloat(document.getElementById('currentBalance').value);
var annualPercentageRate = parseFloat(document.getElementById('annualPercentageRate').value);
var monthlyPayment = parseFloat(document.getElementById('monthlyPayment').value);
var newPurchasesMonthly = parseFloat(document.getElementById('newPurchasesMonthly').value);
var resultDiv = document.getElementById('result');
resultDiv.innerHTML = "; // Clear previous results
// Input validation
if (isNaN(currentBalance) || currentBalance < 0) {
resultDiv.innerHTML = 'Please enter a valid outstanding balance (non-negative number).';
return;
}
if (isNaN(annualPercentageRate) || annualPercentageRate < 0) {
resultDiv.innerHTML = 'Please enter a valid annual percentage rate (non-negative number).';
return;
}
if (isNaN(monthlyPayment) || monthlyPayment < 0) {
resultDiv.innerHTML = 'Please enter a valid planned monthly payment (non-negative number).';
return;
}
if (isNaN(newPurchasesMonthly) || newPurchasesMonthly < 0) {
resultDiv.innerHTML = 'Please enter valid average monthly new purchases (non-negative number).';
return;
}
var monthlyInterestRate = (annualPercentageRate / 100) / 12;
var balanceRemaining = currentBalance;
var totalInterestPaid = 0;
var totalPaymentsMade = 0;
var months = 0;
var maxMonths = 360; // Cap at 30 years to prevent infinite loops
// Special case: No balance and no new purchases
if (currentBalance === 0 && newPurchasesMonthly === 0) {
resultDiv.innerHTML = 'You have no outstanding balance and no new purchases. No interest will be paid.';
return;
}
// Check if payment is too low to ever pay off or even cover interest + new purchases
// This is a heuristic to warn the user early.
var estimatedMonthlyInterestOnCurrentBalance = currentBalance * monthlyInterestRate;
if (monthlyPayment 0) {
resultDiv.innerHTML = 'Warning: Your planned monthly payment is likely too low to pay off the balance, especially with new purchases. The balance may never decrease or could even increase.';
// Continue calculation to show the actual outcome up to maxMonths
}
// Simulation loop
while (balanceRemaining > 0 && months < maxMonths) {
months++;
// Add new purchases for the month
balanceRemaining += newPurchasesMonthly;
// Calculate interest for the month on the current balance (including new purchases)
var interestForMonth = balanceRemaining * monthlyInterestRate;
totalInterestPaid += interestForMonth;
// Apply payment
var principalPaid = monthlyPayment – interestForMonth;
if (principalPaid < 0) { // Payment doesn't even cover interest
// Interest is added to the balance, and the full payment is made
balanceRemaining += interestForMonth; // Interest was already added to totalInterestPaid
totalPaymentsMade += monthlyPayment;
} else {
balanceRemaining -= principalPaid; // Reduce balance by principal paid
totalPaymentsMade += monthlyPayment;
}
// If balance goes below zero, adjust the last payment and set balance to 0
if (balanceRemaining = maxMonths && balanceRemaining > 0) {
payoffTime = 'More than ' + (maxMonths / 12) + ' years (balance not paid off)';
resultDiv.innerHTML += 'Note: Your balance was not fully paid off within ' + (maxMonths / 12) + ' years with the given payment and new purchases. Consider increasing your monthly payment or reducing new purchases.';
} else {
payoffTime = years + ' years and ' + remainingMonths + ' months';
}
resultDiv.innerHTML += '
Credit cards offer convenience, but understanding how their interest works is crucial for managing your finances effectively. Unlike fixed-term loans, credit card interest is typically calculated daily or monthly on your outstanding balance, and it can significantly increase the total cost of your purchases if not managed properly.
How Credit Card Interest is Calculated
Most credit cards use an Annual Percentage Rate (APR) to determine the cost of borrowing. This APR is then broken down into a daily or monthly rate. For example, an 18% APR translates to a monthly rate of 1.5% (18% / 12 months) or a daily rate of approximately 0.0493% (18% / 365 days).
Interest is usually calculated on your Average Daily Balance (ADB). This means the credit card company takes the sum of your daily balances for the billing cycle and divides it by the number of days in the cycle. Then, they apply the daily interest rate to this average. If you carry a balance from month to month, new interest is added to your principal, leading to what's known as "compounding interest."
Key Factors Affecting Your Payoff Time and Total Interest
Outstanding Balance: The higher your starting balance, the more interest you'll accrue, assuming all other factors are equal.
Annual Percentage Rate (APR): A higher APR means a higher monthly interest charge, making it harder to pay down your principal.
Monthly Payment: This is one of the most significant factors you control. Paying more than the minimum payment directly reduces your principal faster, which in turn reduces the amount of interest you pay over time.
New Purchases: Adding new purchases to your card each month while carrying a balance can significantly extend your payoff time and increase total interest. It's like trying to fill a leaky bucket while also pouring water out.
Strategies for Faster Payoff and Less Interest
Pay More Than the Minimum: Even a small increase in your monthly payment can shave months or even years off your payoff time and save you hundreds or thousands in interest.
Avoid New Purchases: While paying off a balance, try to avoid using the card for new purchases. This ensures that your payments are primarily going towards reducing your existing debt.
Consider a Balance Transfer: If you have good credit, you might qualify for a balance transfer card with a 0% introductory APR. This can give you a grace period to pay down your principal without accruing interest. Be mindful of balance transfer fees and the APR after the introductory period.
Debt Consolidation: For multiple credit cards, consolidating them into a single loan with a lower interest rate can simplify payments and potentially reduce overall interest.
Budgeting: Create a budget to identify areas where you can cut expenses and allocate more funds towards your credit card debt.
Using the Calculator
Our Credit Card Interest & Payoff Calculator helps you visualize the impact of your payment strategy. By inputting your current balance, APR, planned monthly payment, and any average new monthly purchases, you can see:
How long it will take to pay off your debt.
The total amount of interest you will pay.
The total amount of payments you will make.
Use this tool to experiment with different payment amounts and see how quickly you can become debt-free and save money on interest.