1. What is Credit Card Amortization?

Credit card amortization shows how each payment is split between interest and principal, and how your balance decreases over time. Understanding this helps you see the true cost of carrying a balance.

2. How Does the Calculator Work?

The calculator uses the credit card payment formula:

Where:

• \( Balance_t \) — Current balance (USD)
• \( Balance_{t-1} \) — Previous balance (USD)
• \( r \) — Monthly interest rate (decimal)
• \( PMT \) — Monthly payment (USD)

Explanation: Each month, interest is calculated on the previous balance, then your payment is applied first to the interest, then to the principal.

3. Importance of Payment Calculation

Details: Understanding your amortization schedule helps you see how much interest you'll pay over time and how increasing your payment can save money and shorten payoff time.

4. Using the Calculator

Tips: Enter your current balance, APR, and planned monthly payment. The calculator will show your payoff timeline and total interest paid.

5. Frequently Asked Questions (FAQ)

Q1: Why does most of my payment go to interest at first?
A: When your balance is high, the interest charge is larger, leaving less of your payment to reduce the principal.

Q2: How can I pay off my card faster?
A: Even small increases in your monthly payment can significantly reduce payoff time and total interest.

Q3: What's the minimum payment trap?
A: Making only minimum payments extends payoff time dramatically and results in much higher total interest.

Q4: Does this calculator account for new charges?
A: No, this assumes you stop using the card and pay it off with fixed payments.

Q5: How accurate is this calculator?
A: It provides a good estimate, but actual results may vary slightly due to rounding or billing cycle differences.