Use this calculator to find out how many month you may need to pay off your credit card debt. For the calculations, we have assumed that you make monthly payment on the same date as you receive your credit card statement and also you are not making any additional purchases on the card.
Credit card interest calculations can be really tricky for most of the people. These are indicative numbers only. Actuals may differ because
1. Many credit card companies start charging interest from the date of purchase and not from the date of billing.
2. Most of the credit card companies calculate interest based on average daily reducing balance. That means they calculate outstanding at the end of each day and calculate interest applicable on that. If you have outstanding of Rs. 1 Lakh on 1st of the month and you make a payment of Rs. 10,000 on 10th of the month than when you receive bill on 1st of next month- they would have charged you interest on ((1,00,000*10 (days for interest))+(80,000*20 (days for interest ))/30 days = Rs. 86,667 average daily reducing balance. So if your monthly interest rate is 1.5% than amount in your next billing cycle will be Rs. 81,300.
3. This does not include any taxes on interest charged by credit card companies.
4. If you have any additional purchases in current month than that will also be part of your average daily reducing balance. So let say in the previous example you had made an additional purchase of Rs. 15,000 on 15th of the month. You will be charged interest on (1,00,000*10 (days for interest))+80,000*5 (days for interest )+95,000*15)/30 days = Rs. 94,167 average daily reducing balance. With 1.5% monthly interest rate, your next statement will be for Rs. 96,413.
Tip – if you are running late on your credit card payment, you should make payment to credit card companies as soon as you have money in hand. Even though you have not received next month credit card statement. This is applicable even if you have missed out Rs100 payment in Rs100000 bill. You will need to make interest payment on already paid Rs. 99,900 also.
Break-up of Total Payment