How it Works
To use the calculator, all you need to do is enter the details of the debt you want to pay off, and the hard work is done for you. You should be able to find all the info you need on your credit card statement or your card’s app.
Balance Outstanding: Enter the current balance on your credit card.
Interest Rate: Enter the rate of interest being applied to that balance.
Annual Fee: Enter your card’s annual fee (if you have a no annual fee card, just enter 0).
Minimum Repayment Allowed ($): Your card will have a minimum repayment amount, provided as a dollar amount or percentage. Enter the dollar amount here.
Minimum Repayment Allowing (%): Enter the percentage here.
Make A Higher Repayment: Type the repayment amount you want to make each month.
Reading Your Results
After inputting all the required details, the calculator will automatically update with all the info you need to know. So, how do you read that info?
Front & Centre: At the bottom of the calculator, you can clearly see how long it will take you to pay off your debt if you only make the minimum repayment, compared to the length of time it would take making that larger repayment. You can also see the total interest you would pay in each scenario.
Using The Graph: Using the graph, you can clearly see how your repayments affect the size of your debt. Colour-coded, it shows the speed at which you will clear your debt when you make larger repayments, compared to the much longer time it would take just paying the minimum.
Yearly Breakdown: By clicking on the Yearly Breakdown tab, you get a full view of the interest you will pay on your debt in each scenario, broken down year-by-year.
Now you understand the basics of how to use the credit card repayment calculator, you can start playing around with options. By typing in a higher or lower repayment amount, you will see how that affects the length of time it will take to pay off your balance, and the amount you will pay in interest each month, and overall.
Spending some time doing this, you can find the repayment schedule that will work within your budget, getting you out of debt as quickly as possible, while paying the least amount in interest.
Save Or Send: Want to save this info? Too easy. Use the calculator to save, print or email the information you have found.
Case StudyFreya has a balance of $10,000 on her credit card. Her annual fee is $30, and her interest rate is 16% p.a. While she has only been making the minimum repayments up until now, she wants to pay more to clear her balance faster. Using a credit card repayment calculator, Freya sees that by only paying the minimum on her card, she will remain in debt for 35 years and 11 months. During this period, she will pay $12,257 in interest. That’s almost as much as her entire starting balance. Offering an alternative, the calculator shows Freya that by paying off $300 each month, she will clear her balance in 3 years and 9 months. Paying a total of $3,367 in interest, this saves her $8,890, while getting her out of debt more than 30 years quicker. And if Freya has more money to put towards her credit card repayment each month? By repaying $500 each month, Freya will clear her balance in 2 years, paying $1,725 in interest. That’s a saving of $10,532 on the minimum repayment option. |
How do credit card repayments work?
Every month more interest is added to the principal amount you owe, and interest is charged daily on that whole amount, every single month, until you’ve gotten rid of the whole balance on your credit card (that’s what compound interest is).
You make payments but if you aren’t paying enough, all you’ll be doing is paying off interest and your net credit card debt will slowly go nowhere. If you find yourself saying ‘but I can’t afford much more than the minimum payment’ then keep reading. There is a way out of the problem, and a way to deal with compound interest.
Finding the right repayment amount 💰
When considering a balance transfer deal there are two key questions to ask
yourself:
1) Will your credit history and credit file 👍 or 👎 your chances of getting a balance transfer?
Balance transfer offers are usually given to people in solid employment, with few or no defaults on their credit file, and who rarely or never make a late payment for any reason. If you're unsure of your credit history or haven't
checked it in more than six months, you can get a free credit check and see what's on it. This lets you deal with any issues that might appear or correct any errors before applying too, to give yourself the best chance of succeeding.
2) Do you need longer than the introductory period ⏰ to pay off the balance owing on your card?
It's important to be realistic when calculating what you can pay back each month. If you can supercharge your repayments and knock off $500 or more each month, then great, a 6 months balance transfer offer might be plenty for you, but if you have other obligations and debts, or want to maintain a certain lifestlyle, then you may be interested in a longer balance transfer period. Consider 12 month balance transfer deals if that's you. If the answer is still no, there's no need to panic, and you can still minimise the interest you pay if you work out a sensible amount above the minimum that you can pay back on time every month.
In all reality many people will finish a balance transfer offer with at least some card debt still there. The first statement after the initial 0% interest period can be a rude shock and a minimum of $30-$50 in interest charges starts to appear on your credit card for those with credit card debt around the national average for Australia (currently around $3262). If you are stuck at this point, at or near the end of a balance transfer offer, you need to manage repayments which now include interest. It is also generally advised to wait a minimum of a few months before making a fresh application for credit (such as another balance transfer), so being able to manage for at least a few months is important.
Steps to minimise interest charges after the deal ends 📉
1) 🏦 Scour your bank's credit card options and look for a card with a
lower purchase interest rate
(if you're not on the low rate card already). Contact the bank and ask
about moving the balance to a low rate card. Make sure the purchase rate
will apply, not the cash advance rate. This is known as a card swap, and
when you do it with your existing bank there isn't usually a lot of fuss to process it. You shouldn't need to go through another application process, it will be a simple phone call or request via online banking to get your new card, and close down the old card.
2) ⬆️ Ramp up your repayments as much as possible.
Throw what you can each month onto your repayments, above the minimum (usually as little as 2-2.5%). We've shown how much difference this will make in the tables above. Every dollar over and above the interest amount, or the minimum monthly repayment is 'supercharged' and will reduce the principal balance. This is where compounding can work for you, as your repayment and interest amounts reduce the more you pay off.
3) 💼 Salary Sacrificing
Debts well above the average $3000 could take years to pay off, but one
option that is often not considered is salary sacrificing.
In this kind of arrangement an employer will offer additional financial
benefits as part of the salary package, which can mean you pay less taxes
upfront and also develops more regularity for debt repayments.
While most people know it can be used to help with mortgage payments, many do not realise that the Australian Taxation Office will allow other personal loan facilities, like credit cards, to be part of a salary sacrifice arrangement.
Credit Card Repayment Calculator - Frequently Asked Questions
Balance transfer offers are often a popular choice for cardholders who want to pay down their debt. Used correctly, they allow cardholders to pay down their balance faster, while paying significantly less in interest.
Using Freya as an example, she could transfer her balance to a balance transfer card offering 0% p.a. for 22 months. By paying off $500 each month, she would clear her balance in 20 months, while paying nothing in interest. Compared to the above $500-per-month example, this would save her $1,725 in interest – while getting her out of debt four months faster.
While many cardholders look to balance transfer offers to save on interest, it’s also possible to save on interest simply by switching to a card with a lower rate. Using the calculator, simply change the interest amount to see how much interest you would save by switching to a lower rate option.
Using the calculator, you can see how much your annual fee affects the overall amount you repay. Obviously, by switching to a lower annual fee card, there would be some money-saving over time. However, over both the long and short term, it is the card’s interest rate that will be the biggest factor to affect how much you pay back on your debt.
With that being said, a low rate and low annual fee combo could be worth looking out for if you’re serious about paying down your debt.
