Credit Card Payoff Calculator

How a credit card minimum payment is calculated

Since 2011, UK card issuers have had to set the minimum payment at least high enough to cover that month's interest, fees and charges, plus 1% of the outstanding balance. Most set it as exactly that: interest plus 1%, subject to a floor of around £5.

The consequence is the part nobody expects. Because the 1% is calculated on a balance that falls each month, the minimum payment falls with it. You are chasing a target that keeps moving away from you, and the proportion of each payment going to interest stays punishingly high for years.

On a £3,000 balance at 24.9% APR, the first minimum payment is about £92.25, and £62.25 of that is interest. Only £30 comes off what you owe. That ratio is why paying the minimum feels like standing still: for the first year or so, it very nearly is.

What paying only the minimum actually costs

On that same £3,000 at 24.9%, paying only the minimum clears the card in 345 months. That is 28 years and 9 months, and it costs £5,998.53 in interest, which is almost exactly double the amount borrowed. You would repay £8,998.53 in total for £3,000 of spending.

Adding a fixed £50 a month on top of the minimum changes the answer beyond recognition: 47 months instead of 345, and £1,373.13 of interest instead of £5,998.53. Fifty pounds a month saves over £4,600 and nearly twenty-five years.

Paying a flat £150 a month, and crucially not letting it fall as the balance does, clears it in 27 months for £915.95 of interest. The difference between the three outcomes is not the interest rate, which never changed. It is whether the payment is allowed to shrink.

This is why every UK card statement carries a wording requirement showing what paying only the minimum will cost. It is worth reading that box on your own statement, because the numbers on a real balance tend to land harder than a worked example.

The single most effective change: fix your payment

If you take one thing from this page, it is to set a standing payment amount rather than paying whatever the minimum happens to be. Choose a figure you can sustain, and keep paying it as the balance falls.

That one change converts a shrinking payment into a fixed one, which is the entire difference between 345 months and 27. It costs nothing, requires no new product, no application and no credit check, and it is available today on the card you already have.

Set it up as a Direct Debit for a fixed amount rather than for the minimum. Most issuers offer both, and the default is frequently the minimum. Check which one yours is set to, because a Direct Debit quietly set to the minimum is the most expensive default in UK consumer credit.

When a balance transfer beats overpaying

A 0% balance transfer card moves the debt to a card charging no interest for a promotional period, typically for a one-off fee of around 2 to 3% of the amount transferred. On a £3,000 balance that is roughly £60 to £90, against the £5,998 that paying the minimum would cost.

The arithmetic almost always favours the transfer, provided you clear the balance within the promotional window. Divide the balance by the number of 0% months to get the payment that will actually finish the job, and set that as a fixed Direct Debit on day one.

Two things spoil it. Spending on the new card usually attracts interest at the normal rate and, depending on the issuer, payments may be allocated to the more expensive debt first, so keep the transfer card for the transfer only. And when the promotional period ends, the reversion rate applies to whatever is left, which is how a transfer becomes a more expensive version of the problem it solved.

This calculator's comparison mode prices real transfer offers against staying put, fee included, so the decision rests on total cost rather than on the headline 0%.

Credit utilisation, and why the balance matters beyond the interest

Credit utilisation is your balance as a percentage of your credit limit, and it is one of the more heavily weighted factors in UK credit scoring. A £3,000 balance on a £4,000 limit is 75% utilisation, which reads as reliance on credit even when every payment has been made on time.

Utilisation is typically reported once a month, on your statement date. Paying a chunk off shortly before that date rather than shortly after can lower the figure that gets reported, which matters if you have a mortgage application coming.

Cutting the balance therefore does two things at once: it stops the interest and it improves how your file reads. Our credit utilisation calculator works out how much to pay down to reach a given percentage.

If the minimum payment is already a struggle

Missing payments triggers fees and a default marker that stays on your file for six years, so it is worth acting before that point rather than after. Card issuers have obligations under FCA rules to help customers in persistent debt, and contacting them is not an admission of failure, it is the mechanism working as intended.

Free, independent debt advice is available from StepChange, Citizens Advice and National Debtline. None of them charge, none of them sell you a product, and they can negotiate with creditors on your behalf, including for interest to be frozen. Fee-charging debt management companies offer no advantage over them.

If you have been paying more in interest and charges than off the balance for eighteen months, FCA rules on persistent debt require your issuer to contact you and propose a way to repay within a reasonable period. If that letter has arrived, engage with it rather than filing it: the alternative is usually the card being suspended.