How the payoff model works
Each month, the model adds interest using APR divided by twelve, then deducts the payment. The final payment is reduced to the remaining amount. It repeats this process until the balance is repaid and totals the interest charged.
A payment that does not exceed the monthly interest cannot reduce a positive balance in this model. The tool reports an error rather than presenting an unrealistic payoff date. A zero-interest balance is repaid through contributions alone, with the final month rounded up if needed.
An example you can check yourself
For a balance of 1,000 at 0% APR and a fixed payment of 300, repayment takes four months. The payments are 300, 300, 300 and 100, with no interest. At a positive APR, some of each payment first covers interest, so the same balance normally takes more money to repay.
At 24% APR, the simplified monthly rate is 2%. A 1,000 balance generates 20 of interest in the first month before the payment. Paying 20 leaves the balance unchanged in that first step; paying less makes it grow.
Where your statement may differ
Issuers may calculate interest using daily balances, different rates for purchases and cash advances, promotional periods, fees and grace-period rules. The estimate assumes one unchanged APR and one fixed payment, with no missed payments or new spending.
A minimum payment can change as the balance changes, so a fixed-payment estimate is not a simulation of every issuer’s minimum-payment policy. Verify the statement’s repayment disclosure and consider whether an emergency reserve is needed to avoid charging new expenses during repayment.
Questions readers often ask
Does the model allow new purchases?
No. New charges would change the payoff path.
Why is my payment rejected?
A payment at or below monthly interest cannot repay a positive balance under the model assumptions.
Does APR stay fixed?
Yes. Promotional expiry and variable-rate changes are not simulated.
Why might my card statement show another result?
Daily interest methods, fees, payment timing and multiple APRs can differ from this simplified model.
Keep the result in context
The calculator uses simplified assumptions. It does not retrieve market prices, personalized tax rates or lender terms. Verify important inputs and revisit the estimate when circumstances change.
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Further reading: Investor.gov financial planning tools.