Credit Card Payment Calculator (2023)

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Knowledge is power. But it’s also money.

Yet, despite the average Canadian having two credit cards to their name, many people are limited in their understanding of how they work - especially when it comes to credit card interest rates.

Do you find yourself asking how much interest you will be charged on your credit cards? Look no further than our credit card payment calculator. We’ll tell you how credit card interest works and give you useful tips to avoid costly credit card interest rates.

What is the interest rate on a credit card?

Let’s start by defining exactly what credit card interest rates are.

Credit card interest is the money you pay your credit card issuer for owing them money.

In Canada, the amount you have to pay is dependent on two main factors:

  • The type of credit card you’re opting for
  • External factors e.g. the state of the market

The average APR for Canadian credit cards is 19.99%-22.99%. Your personalized credit card interest rate will usually be available on your credit card contract, or at the bottom of your statement.

Good to know

As a general rule, credit card issuers can’t change your credit card interest rate for your existing balance, however, they can change it for new purchases. In the case of the latter, you will be informed approximately six weeks before any changes come into play.

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How is credit card interest work?

Once your billing cycle ends (typically 28-31 days), any outstanding balance on purchases made during that period will be subject to the credit card interest rate. This will typically appear on your statement, alongside any additional charges.

Let’s start with a quick lesson on how credit card interest rates work:

Good to know

Credit card interest = [APR/365 days] × average daily balance × days in the billing cycle

Let’s take a closer look at the terms APR, average daily balance and billing cycle.

  • Calculate your daily APR: APR is short for annual percentage rate, in other words, how much it costs to borrow money over the space of a year. Since credit card interest is calculated daily, the APR has to be divided by 365 to convert it to the daily rate.
  • Calculate your average daily balance: To do this, add the outstanding balance from the previous billing cycle, with any purchases made in your current billing cycle, then divide the total by the number of days in your billing cycle (available on your statement).
  • Billing cycles: A billing cycle is the period of time between billing statements' closing date. Each credit card company has its own, but typically they are between 28 and 31 days for credit cards.

Let’s look at an example:

The average APR for Canadian credit cards is 19.99%-22.99%. So, assuming a rate of 22% and $8,000 as an average daily balance for the month, and an average billing cycle of 30 days, this is what the calculation would look that:

  • 22% APR × 365 days = 0.000603
  • 0.000603 × $8,000 = 2.7379
  • 2.7379 ×30 days = $144.66 interest payment

Leaving the $8,000 balance unpaid for one year would mean more than $1,735 just in credit interest payments. That’s no small sum!

Good to know

It’s important to remember that you can avoid having to pay any fee whatsoever by simply paying off your outstanding balance before the end of each billing cycle.

How does our credit card interest calculator work?

Our credit card interest calculator can help you to calculate how it long it will take to pay off your balance and the total interest you'll pay if only paying off the monthly minimum.

Just enter:

  • Your current balance
  • Your annual interest rate
  • And either your monthly minimum monthly payment or monthly minimum payment

The minimums should be available on your statement and in your card's terms and conditions.

Of course the first step for avoiding high credit card interest rates is to choose a credit card with a low APR.

Using a credit card comparison tool will make the process of choosing the right credit card for your needs and financial goals easier. All you have to do is answer a few questions, then let the tool do the work for you.

HelloSafe’s credit card comparison tool questionnaire

Once you receive your results, you will be provided with a list of credit cards best suited to your needs and financial situation. Click on the cards you want to compare to receive your personalized comparison report.

HelloSafe’s credit card comparison tool

How is a credit card’s minimum payment calculated?

A credit card’s minimum payment is the minimum amount that must be paid each month by the cardholder, in order for their account to remain in good standing. This amount is determined by your credit card issuer and can either be a flat rate, or a percentage of your unpaid balance - whichever is greater. You can check the terms and conditions of your credit card to find these details, but it typically ranges from 1% to 3% of your outstanding balance.

Once the payment percentage minimum is less than, say, $10 or $20 you will pay that fixed amount instead of a percentage.

How do I calculate how long it will take to pay off credit card debt?

The maximum length to pay it off is determined by the lender's minimum payment percentage or flat rate. The amortization formula for paying off a credit card is complicated, so most people will be better off using a calculator or spreadsheet.

Good to know

Time to payoff loan = credit card balance ÷ [1 - (1 ÷ (1+APR ÷12) ^ (years * 12) ÷ (APR ÷ 12)

In point of fact, you can pay off a credit card as quickly as you like. Doing so is the best way to assure that you're not wasting money on interest.

Only planning to pay the minimum? Here's what that looks like for one year assuming a $750 balance, a 20% interest rate a 3% minimum payment percentage.

Month 1PaymentInterestPrincipalBalance
1
$22.50$12.50$10.00$740.00
2
$22.20$12.33$9.87$730.13
3
$21.90$12.17$9.74$720.40
4
$21.61$12.01$9.61$710.79
5
$21.32$11.85$9.48$701.32
6
$21.04$11.69$9.35$691.96
7
$20.76$11.53$9.23$682.74
8
$20.48$11.38$9.10$673.64
9
$20.21$11.23$8.98$664.65
10
$19.94$11.08$8.86$655.79
11
$19.67$10.93$8.74$647.05
12
$19.41$10.78$8.63$638.42
Year Total
$251.04$128.70$102.96$638.42
Credit card amortization table — one year

You'll pay more towards the interest than towards the principal and still owe $628.42 per year! And you won't pay it off completely for 110 months! Not only that, but the total interest is $678.17 is almost as much as the $750 originally borrowed.

Of course, this payment schedule can be brought forward if you choose to make additional payments on certain months, and it can be delayed if you do not meet your minimum monthly payments.

How can I calculate which credit card to pay off first?

As mentioned earlier, the average Canadian has at least two credit cards. You may have had a successful financial period and find yourself in a position where you’re able to make additional payments, but are unsure which card you should pay first.

There are two main ways you can approach it:

  • The highest-interest-first plan: - This is precisely what it sounds like, you list your debts in order of the highest interest rate to lowest. Focus on paying off the highest-interest debt first. This method will save you money in the long run.
  • The debt snowball plan: - Once you’ve paid off the minimum payment on all your debts in a month, you put whatever finances you have left over into paying for your smaller debts. This allows you to pay off your smaller debts quickly, while still keeping up with the payments for your larger debts. Once the small debts are paid, you’re left with a psychological boost that keeps you motivated to pay off the next row of debts.

How to pay off credit card debt faster?

Here’s how to pay off your credit card debt as quickly as possible:

  1. Consider getting a personal or debt consolidation loan: As mentioned earlier, credit card interest rates are one of the highest rates when it comes to borrowing money, so paying off your outstanding balance as soon as possible will help you avoid additional charges. But, aren’t I just replacing one debt with another? Yes, but you may be surprised at how much lower the APR for certain loans is. A lower APR means you’ll be able to pay off your debt more quickly.
  1. Track your finances: This may sound obvious, but not tracking your finances is a surefire way to spend money that you don’t have, or run into late fees, credit card interest and other charges. You may be shocked at how much they add up. Where possible, pay off any outstanding balance well before the billing cycle ends.

Tips for saving on credit card interest:

  • Keep track of your expenditures with a dedicated app for your credit card issuer or automated text messages when you make a purchase.
  • Have a direct debit set up from your current account to your credit card that pays off outstanding payments before the end of the month. This will avoid credit card interest charges

Interest rates are among the highest for credit cards, and late fees can be substantial. Use HelloSafe’s credit card comparison tool to make sure you’re picking a credit card with a low-interest rate that suits your needs.

Compare dozens of Canada's top credit cards now

Find your best credit card
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