How to calculate your credit card monthly repayment
Calculate how much you need to pay each month to clear your credit card debt and meet your financial goal.
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When you receive your credit card statement each month, you'll see both the closing balance and a "minimum monthly repayment" amount. While the closing balance is everything you owe, the minimum repayment shows what you have to pay off the card by the due date in order to keep your account in good standing.
Only paying the minimum repayment will help you avoid late payment fees, but it could also take you years to pay off your credit card and it can lead to ongoing credit card debt, interest charges and other risks. Use the calculator below to determine how long it will take you to pay off your debt based on how much you're currently paying and how much you'd need to pay each month to meet your financial goal.
Credit card repayment and interest calculator
How is credit card interest calculated?
There are two basic forms of interest, simple and compound, and credit cards accrue compound interest. There are also two parts to a credit card balance, the principal balance and the interest charges. Simple interest is charged as a fixed percentage on only the principal balance, so as you pay it down, regardless of how much you pay, you will pay less interest in the subsequent period. This assumes you are not making any new purchases to add to the principal balance.
Compound interest is charged as a fixed percentage on both the principal balance and the existing interest charges, so as you pay it down, if you're paying too little, you can end up paying more interest in the subsequent period. This is why it is critical to pay off as much of your statement balance as possible, to avoid paying interest on interest.
What is the minimum I need to pay on my credit card?
Your card issuer sets the minimum monthly repayment on your credit card. This amount varies between credit card issuers but is usually calculated as 2–3% (although it can sometimes can be up to 10%) of your closing balance, with a minimum dollar charge of around $20 to $30.
To give you an idea of these costs, here are the minimum monthly repayment requirements of some popular credit card issuers:
- American Express credit cards. The higher of $30 or 2.5% of your closing balance
- ANZ credit cards. The higher of $25 or 2% of the closing balance
- CommBank credit cards. The higher of $25 or 2% of the closing balance
- NAB credit cards. The higher of $25 or 2% of the closing balance
- St.George credit cards. The higher of $10 or 2% of the closing balance
- Westpac credit cards. The higher of $10 or 2% of the closing balance
Every time you get a credit card statement, the minimum repayment amount will be shown in dollars. This means you won't have to calculate the percentage owed if you carry a balance. Using the calculator above, if you input the minimum repayment amount into the 'Monthly payment' field, it will tell you how long it will take to pay off your balance. You can then change your payment amount to work towards your goal payoff time, or enter your payoff goal and it will tell you how much to pay each month (assuming you are not making new purchases).
What will happen if I just make the minimum credit card repayment?
If you just make the minimum monthly payment, you'll only pay off a small percentage of your credit card debt (leaving the majority of your balance to grow with interest). This means your credit card debt could cost you hundreds or thousands of dollars in interest, plus it could take years to pay back. If you continually carry a balance that takes up a large portion of your overall card limit, this can also negatively impact your credit score.
Instead of only paying the minimum repayment, you should always aim to either pay off your balance in full or try to clear as much of the debt you can each month to minimise your interest costs.
Maximising your repayment dollars
Let's say you have a $5,000 debt on a credit card with an interest rate of 15% p.a. and you want to work out the most efficient way to pay down the debt.
The minimum monthly payment on your latest credit card statement is $100 (the greater of $20 or 2% of the closing balance) but you calculate how much you can save if you start putting money aside and paying $250 off your card each month.
|Minimum monthly repayments||Higher monthly repayments|
|Credit card debt||$5,000||$5,000|
|Interest rate||15% p.a.||15% p.a.|
|Monthly repayment amount||the greater of $20 or 2% of the closing balance||$250|
|Total time to pay off debt||24 years 5 months||2 years|
|Total interest paid||$7,245.78||$789.73|
|Total amount saved||-||$6,456.05|
As you can see from the table, you can save a massive $6,456.05 by making higher repayments and pay your debt off in two years. However, if you were to continue to only make the minimum required payment, it would take more than 24 years to get out of debt. This clearly demonstrates why you should always try to pay more than the minimum monthly payment if possible.
What can I do if I'm struggling to repay my debt?
If you're struggling to pay off your credit card debt because of interest costs, you can consider transferring it to a card with 0% on balance transfers. This means you can repay your debt without paying any interest for a promotional period (such as 0% p.a for 24 months). At the end of the introductory offer, the standard cash advance rate or interest rate will apply to your debt.
You'll still need to pay more than the minimum repayment to completely pay off your debt before the revert rate applies. For example, if you had a credit card debt of $2,000 and a card with 0% on balance transfers for 12 months, you'd need to pay $250 per month to clear the debt within a year and before you start accruing interest. You may be paying more upfront, but your overall interest costs will be less and you'll pay off your debt faster if you pay more than the minimum requirement.
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Frequently asked questions
Want to know more about calculating credit card payments or minimum payments? We have answered some of the most commonly asked questions below. You can also use the form below to get in touch with us if you have any other questions.
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