Total interest paid to eliminate a credit card balance at current payment

The most expensive consumer borrowing in finance

Standard credit card APRs run 20-30%. The market average is around 23%. Compared to any other borrowing mainstream consumers encounter — mortgages at 4.5%, personal loans at 8-12%, overdrafts at 35-40%, payday loans at 292% (the legal cap) — credit cards sit near the top of the expensive spectrum. This calculator shows you what the interest actually costs on a specific balance over a specific repayment period. The number is usually sobering, and that's the point.

The daily compounding reality

Credit card interest compounds daily, not monthly. A 22% APR translates to a daily rate of roughly 0.0603%. This sounds trivial — 0.0603% of anything is small. Compounded daily over a 365-day year it produces the 22% APR. Compounded over many years without payment, it produces debt doublings faster than most people expect. A 5,000 balance at 22% paying only interest doubles to 10,000 in about 3.2 years. Doubles again to 20,000 in another 3.2 years. Nine years of no-payment would produce a balance of 30,000+ — 6× the original. This is why credit card debt that isn't actively paid down becomes unmanageable fast.

The minimum payment death spiral

Credit card minimums are typically 1-3% of balance plus interest, with a 5 floor. On a 5,000 balance at 22% APR, minimum payment is roughly 140. That 140 includes 92 of interest and 48 of principal. At this pace, the balance takes over 18 years to clear, and total interest paid exceeds the original balance. The minimum payment structure is specifically designed to be manageable for borrowers while maximising long-term interest revenue for the card issuer. Paying only the minimum is the most expensive way to carry credit card debt.

The interest-free period that confuses people

Most credit cards include a "up to 56 days interest free" feature. This only applies if you clear the balance in full by the statement due date each month. If you carry any balance forward, the interest-free period disappears — you're charged interest from the transaction date on all purchases, including new purchases. The moment you start carrying a balance is the moment your card effectively becomes a 22% APR loan on all activity, not just the carried amount. This is why transactors (pay-in-full-monthly) pay zero interest and revolvers (carry-balance) pay surprisingly high effective rates.

The real cost of carrying 5,000

At 22% APR, carrying a 5,000 balance continuously (paying just the interest each month to keep the balance stable):

Monthly interest: approximately 92.
Annual interest: approximately 1,100.
Over 10 years: 11,000 in interest on a 5,000 balance.
Over 20 years: 22,000 in interest.

At this point you've paid more than 4× the original balance in interest without ever reducing the principal. Credit card debt compounds this harm when minimum payments are insufficient to cover even the interest growth, which happens when balances grow despite regular minimum payments.

The balance transfer lever

0% balance transfer cards remain the most powerful single intervention for credit card debt. Moving 5,000 from a 22% card onto a 0%-for-24-months transfer card (typical fee 3% = 150) saves roughly 1,500-2,000 in interest over two years if the balance is cleared within the promotional period. The 150 fee is worth it; the interest-free period is not — it's an opportunity to pay down principal without interest drag. If you successfully clear the 5,000 within 24 months at 208/month, you've paid 150 + 0 interest = 150 total cost. The same 5,000 paid over 24 months at 22% costs roughly 1,200 in interest. The behavioural trap: treating the transfer as creating capacity to keep borrowing rather than as an acceleration of debt clearance.

Interest-charge calculation methods

Credit card interest is calculated using "daily average balance" methodology in most cases. The card tracks your balance each day of the billing period, averages those daily balances, and applies the monthly rate to the average. This matters because: paying halfway through a billing cycle reduces the average balance from that point forward, reducing interest charged. The older "adjusted balance" method (less common now) only credits payments at the end of the cycle. Daily average is more borrower-friendly but still produces significant interest on carried balances.

The cost of the "cash advance" trap

Using a credit card to withdraw cash (via ATM or cash-like transaction) triggers a separate, worse interest regime. Cash advance rates are typically 27-30% APR (higher than purchase rates). There's no interest-free period on cash advances — interest accrues from the withdrawal date. Most cards also charge a cash advance fee of 2.5-3% of the withdrawn amount. A 200 cash advance typically costs 6 in fee plus roughly 5/month in interest until paid off. These transactions should be avoided entirely except in genuine emergencies. Standard card use should be purchases only.

When credit cards genuinely make sense

Credit cards have real value when used correctly:

Transactor pattern (clear balance monthly): earns rewards, builds credit history, provides Section 75 protection on purchases 100-30,000, interest-free period acts as up to 56 days of cash flow smoothing.
Emergency reserve: available credit (not necessarily used) acts as emergency capacity if savings aren't yet built.
Specific promotional periods: 0% on purchases for 12-24 months can be legitimate short-term financing if repayment plan is clear.

The problem isn't credit cards; it's carrying balances on them. The calculator above isn't showing you a "credit card bad" message — it's showing you the cost of the specific usage pattern that makes cards expensive.

What this calculator shows

The tool computes the interest cost of carrying a specific balance at a specific rate for a specific period, or alternatively, the time to clear a balance at a fixed payment. It doesn't model changing rates during promotional periods, different calculation methodologies, or the interaction with new spending. For straightforward "how much am I paying in interest?" questions, the figure is accurate.