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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 goals.

When you receive your credit card statement each month, you’ll see both the closing balance and a minimum 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, it could also take you years to pay off your credit card balance and can lead to ongoing credit card debt and high interest charges. Let’s take a look at how much you should pay off your credit card balance each month in order to get out of debt faster and meet your financial goals quicker.

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, you can end up paying more interest in the subsequent period if you’re paying too little. This is why it’s critical to pay off as much of your statement balance as possible, to avoid paying interest on interest.

How do I calculate my monthly payment?

With your total credit card debt in mind, you need to figure out how much you should pay toward your balance each month. To do so, calculate the following:

  • Your minimum interest payment. The annual percentage rate (APR) reflects the amount of interest you’ll pay over an entire year. To determine this amount, divide your APR by the number of days in a year, then multiply the result by your balance. Take this figure and multiply it by the number of days in your current billing cycle. This is your monthly interest payment.
  • How many months it’ll take to pay off your balance making interest-only payments. Divide your balance by the monthly interest payment you calculated above to find out how many months it’ll take to pay off your credit card.
  • How many months it’ll take to pay off your balance making interest + principal payments. This is where you can test different debt repayment schemes to find one that fits your goals. Decide how much you’re willing to pay beyond your the minimum payment amount and recalculate how many months it’ll take to bring the balance to zero. Alternatively, decide when you want the balance paid off and calculate backwards to the monthly payment you’d have to make in order to meet this deadline.

Intentionally going over these numbers will help you get a clear view of how your payments fit into an overall debt reduction scheme. This will put you in a much better place to decide on a payment amount that reflects both your current budget as well as your future financial goals.

What is the minimum I need to pay on my credit card?

Your credit card provider sets the minimum monthly repayment amount on your credit card. This amount varies between credit card providers but is usually represented as a flat dollar amount (typically $10) or it may be calculated as a percentage of your outstanding balance (usually 2-3%).

To give you an idea of these costs, here are the minimum monthly repayment requirements of some popular credit card providers:

Card providerMinimum payment formulaMinimum dollar or % charged per payment
American ExpressThe lesser of the total of $10.00 + interest, fees and any previously billed minimum payments that are unpaid.$10
BMOMinimum payment of $10.00 + interest, fees and any previously billed minimum payments that are unpaid or the amount by which your new balance exceeds your credit limit.$10
CIBCMinimum payment of $10.00 + interest, fees and any previously billed minimum payments that are unpaid or the amount by which your new balance exceeds your credit limit.$10
MBNAMinimum payment of $10.00 + interest, fees and any previously billed minimum payments that are unpaid or the amount by which your new balance exceeds your credit limit.$10
RBCMinimum payment of $10.00 + interest and fees.$10
RogersAny unpaid past due amounts, any amount exceeding your credit limit, plus the greater of: a) $10.00 + interest and fees, or b) 2% of your balance.$10 or 2%
ScotiabankMinimum payment of $10.00 + interest, fees and any previously billed minimum payments that are unpaid or the amount by which your new balance exceeds your credit limit.$10
TangerineMinimum payment is greater of: a) 2% of your new balance + interest, past due and over limit amount, or b) $25.00.2% or $25
TD$10.00 plus any interest and fees (plus any past due amount or any amount that exceeds your Credit Limit).$10

* Please note that these costs may vary between credit cards offered by the same provider. Always check the Product Disclosure Statement (PDS) for your specific credit card.

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 you 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’re 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 even thousands of dollars in interest, plus it could take years to pay it 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 since your credit utilization ratio will be high.

Instead of only paying the minimum repayment amount, 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 minimize your interest costs.

Maximizing your repayment dollars

Let’s say you have a $1,000 debt on a credit card with an interest rate of 19.99% APR 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 $10 + interest and fees or 2.2% (whichever is greater).

Minimum monthly repaymentsHigher monthly repayments
Credit card debt$1,000$1,000
Interest rate19.99% APR19.99% APR
Monthly repayment amount$10 + interest and fees or 2.2% (whichever is greater)$100
Total time to pay off debt157 months or 13.08 years12 months or 1 year
Total interest paid$1,595.79$102.98
Total amount saved$1,492.81

As you can see from the table, you can save a massive $1,492.81 by making higher repayments and pay your debt off in just one year. However, if you were to continue to only make the minimum required payment, it would take more than 13 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 balance transfer credit card with a 0% APR. This means you can repay your debt without paying any interest for a promotional period (such as 0% for six months). At the end of the introductory offer, the standard purchase rate or cash advance 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 six months, you’d need to pay $500 per month to clear the debt within six months, before you start accruing interest. You may be paying more upfront, but your overall interest costs will be less – or even zero – if you pay it off during the 0% interest promo period, and you’ll pay off your debt faster.

Frequently asked questions

Want to know more about calculating credit card payments or minimum payments? We’ve answered some of the most commonly asked questions below. You can also use the live chat below to get in touch with us if you have any other questions.

Images: Getty Images

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