Ever wondered what it may take to come out of a credit card debt? or how long it will take to pay off the balance of a credit card with and without making additional monthly payments? or what to do to pay off credit card debt faster? The Credit Card Payoff Calculator for Microsoft® Excel® and OpenOffice can help to find an answer to a few of this questions and easily can be a first step to your debt reduction. This calculator is the first one in the series of Debt Reduction Calculators provided by Spreadsheet123.

This credit card debt reduction calculator uses multiple line credit approach, which is defined as cash advanced balance and the balance for purchases, both of which are charged at different interest rates (APR). Calculator helps to solve for a minimum monthly payments as well as minimum plus interest payments with ability to include additional monthly amounts. It can also solve for a time to pay off, if making only a minimum payments.

Learn How to calculate Interest on balances of the Credit Card? and read our tips on How to avoid credit card debts?

Below on this page we also describe the methods of calculating the interest and provide more details about how to calculate the minimum payment on the credit card.

With help of this calculator it will be much easier to figure out the ways to completely pay off your credit card debt and helps to understand just how much it can really cost you in interest.

## Free Credit Card Pay Off Calculator

for Excel®, OpenOffice
File: .XLS Size: ~952KB
Template Specifications
Version
CDPO 1.40

Requirements
Microsoft Excel® 2002(XP) or Later

Help & Questions?

Disclaimer This calculator and information on this page is for educational and illustrative purposes only and not in any way meant to provide financial advise. We do not guarantee the results. Interest of your credit facilities is usually variable and therefore all calculation are only estimates and may not be appropriate to your unique financial situation. Use this calculator at your own risk. You should seek the advice of qualified professionals regarding your Debt and Credit Card Repayments. Spreadsheet123.com will not and can not be held liable for any damages or loss caused by use of this calculator.

## How to calculate Interest on balances of the Credit Card?

### What is APR and EAR?

APR (Annual Percentage Rate) is a rate provided to consumer for any balance borrowed from Credit Card. Most common way used to calculate your interest is a daily compounding of the interest based on daily closing balance. This explains the fact as to why your interest differ from month to month.

EAR (Effective Annual Rate) is more direct reference for the one-year rate of interest. The formula to calculate EAR is: EAR=((1+APR/N)^N)-1 where N is the number of compounding periods. Lets say that the interest is compounded daily and APR is 16.9% than EAR will look like this EAR=((1+16.9%/365)^365)-1 and willbe 18.41% or if the interest is compounded monthly then EAR=((1+16.9%/12)^12)-1 and will be 18.27%.

### Methods of Calculating Interest

#### Average Daily Balance

There are few ways to calculate an Interest on the credit cards, but most commonly use is an Average Daily Balance method, which is a sum of the daily balances divided on the number of days within that charging cycle to get an average daily balance, which is then multiplied by an APR divided on the number of cycles within a year which is usually 12.

Monthly Interest Charge=Average Daily Balance * (APR / 12)

This is a pretty good way to calculate your monthly interest, but may not be exact reflection of what you get on your monthly statements.

#### Daily Accrual

There is also a Daily Accrual method that is commonly used in the UK. This method is similar to the one explained above with difference of calculating interest for the daily balance and compounding it to a periodic (usually monthly) charge. In this method each days closing balance is multiplied on the APR divided on 365 days to calculate daily interest charges. Then all of the daily interest sums are added together.

Formula to calculate daily accrual interest for the period looks like this:

Monthly Interest = (Closing balance day 1 * (APR/365)) + ... + (Closing balance day 30 * (APR/365))

Calculation of the monthly interest charges with this method will depend on the number of days within a billing cycle, changes in daily balance and APR.

The calculator above allows for two lines of a credit and therefore calculation of the interest also spreads on two lines, that is calculation of interest on the balance on purchases plus interest calculation on the cash balance, which is usually much higher.

### How to calculate the minimum payment on credit card?

Minimum payment is a required by the bank sum, that is determinate by percentage of the borrowed amounts from balance of the credit card and stands at usually 2-5%. As standard do banks require between 2 to 5% of the outstanding balance to be paid on the monthly basis along with interest or it can also be a fixed amount of dollar for a low balance, which as standard is \$15.00 for US and Canada and about £5.00 on most credit cards in UK, usually depends on whichever is greater.

Ways of calculating a minimum payment is pretty simple is to multiply the balance on the minimum percentage (2-5%) required paying, which is greater than the sum of interest to cover partial principal payment. The calculator above has an option to define a minimum only or a minimum plus interest ways to pay.

Fixed Payments on Low Balance is paid when the minimum payment, which usually between 2 and 5% of the balance are lower than that fixed payment amount, which is \$15.00 for US and Canada or £5.00 for UK on most Credit Cards. In other words the minimum amount required to be paid towards principal is between 2 to 5% of the balance of the credit card. The fixed amount will be paid only when the minimum amount, calculated as percentage of the balance will become equal to or lower than that fixed payment amount.

### Principal Payment Distribution.

This is defined as distribution of the principal payment on two lines of credit described as balance on purchases and cash balance of the credit card. Because of the difference in interests for this balances, most banks usually leave cash balance payments right until the very end of clearance of the balance on purchases or may only allocate a very little portion of principal towards those cash balance repayments. You can change this by changing the value of the cell named "Principal Payment Distribution" by changing the percentage of allocation that it usually varies between 0% and 15% depending on your credit cards agreement.

### Fixed amount and Additional Payment.

Fixed amount can be any amount that has been decided to pay, but it must be equal or above than the first month payment amount. Making fixed monthly payments will make a significant difference on the number of payments and total interest paid, this will let you pay your credit card balance much sooner and for sure save some interest too. Do not get confused by definition of a Fixed Payment and Fixed Payment on low balance, since this two are completely different payments.

Additional payments are usually the payments that are made occasionally. Depending on the sums paid this can also be a big difference to the paid interest amounts as well as reduction of the number of payments. Both methods can be used with our calculator.