Use this when
You can afford at least the contractual minimum and want to compare a fixed repayment plan against drifting with minimum payments.
How the balance starts moving
| Month | Payment | Interest | Balance left |
|---|
What this does and does not tell you
Pause and get help when
The minimum payments are already unaffordable, you are using new credit to pay old credit, or priority bills are being missed.
How the calculator works
Each month the calculator charges interest at the APR divided by 12, then takes a payment. On the minimum-payment route the payment is the largest of three amounts: the cash floor, the minimum percentage of the balance, or that month's interest plus 1% of the balance. The third test reflects the FCA rule that a card's minimum repayment must cover at least the interest, fees and charges plus 1% of the amount owed. On the fixed route the payment never changes, and if it is not more than the interest charged the calculator stops and reports that the card is not clearing. Both routes stop at 600 months.
Worked example with the default figures
The defaults are a £3,500 balance at 24.9% APR, a 2.5% minimum with a £25 floor, and a fixed payment of £175. Interest in the first month is £72.63. The minimum route pays £107.63 that month, because interest plus 1% is more than 2.5% of the balance (£87.50). At that pace the card takes 200 months, more than 16 years, and £6,129.84 of interest to clear. A fixed £175 clears it in 27 months with £1,068.61 of interest, about £5,061 less, and the balance after 12 payments is £2,121.13. At these figures a fixed £72 a month never clears the card, while £73 takes 257 months.
Persistent debt: what card providers must do
Under FCA rules a customer is in persistent debt when, over 18 months, they have paid more in interest, fees and charges than they have repaid of the balance. The provider must then contact them to prompt a change in repayments. After 36 months it must offer a way to repay in a reasonable period and, if that is unaffordable, show forbearance, which may include reducing, waiving or cancelling interest, fees or charges. On the default minimum route about two-thirds of each early payment is interest, the pattern those rules target.
Limits of the result
- Card providers may calculate interest and minimum payments differently; the card statement shows the real figures.
- New spending, fees, promotional rates and rate changes are not included.
- Payoff dates count forward from the current month on the device running the calculator.
Useful guidance
- MoneyHelper: a simple guide to credit cards
- MoneyHelper: persistent credit card debt
- UK Tax Drag: balance transfer planner
- UK Tax Drag: debt help route
- UK Tax Drag: credit score myths explained
- FCA Handbook: CONC 6.7, minimum repayments and persistent debt
- FCA: new credit card rules on persistent debt
Frequently asked questions
The questions readers most commonly ask about this topic. Each answer is reviewed by the Editor against current HMRC, FCA and MoneyHelper guidance.
▸ Why do minimum payments take so long to clear a balance?
Minimum payments are typically set at 1-3% of the outstanding balance, but interest charges of 20-40% APR mean almost all your payment goes to interest, not principal. On a £3,000 balance at 24.9% APR paying just the minimum, you might pay over £4,500 in interest and take 20+ years to clear it. Paying a fixed amount (even just slightly above minimum) dramatically shortens the timeline.
▸ Should I pay off credit cards before saving?
Paying off a card saves interest at the card's APR, and that saving is not taxed, whereas savings interest can be. So clearing a 24% APR balance saves 24% a year in interest on the amount repaid, which can be compared with the rate a savings account pays after tax. Many people also keep a small emergency buffer so an unexpected bill does not go straight back on the card.
▸ Is a 0% balance transfer card worth it?
Often yes, if you have a clear plan. Most 0% balance transfer offers charge a one-off fee of 1-4% of the transferred balance. If you'll clear the balance within the 0% window (typically 18-30 months), the fee saves significant interest. The trap: people transfer and then run up new debt on the original card. Set up a fixed monthly direct debit to clear the new card on schedule.
▸ Does paying off credit cards improve my credit score?
Yes, but slowly. Credit utilisation (balance ÷ credit limit) is a major factor in UK credit scores. Keeping utilisation below 30% per card helps; below 10% is even better. Closing an account after payoff can paradoxically hurt your score by reducing total available credit. Generally: pay it off, keep the account open, use it occasionally for small purchases paid in full.
▸ What happens if I miss a credit card payment?
A late payment fee under your card's terms, the balance starts accruing interest from the statement date, and after 30 days a missed payment marker appears on your credit file for 6 years. After 3-6 months of missed payments, the card issuer may default the account — a more serious credit-file event. If you're struggling, call the issuer BEFORE missing a payment; most will agree a payment plan that's less damaging than default.
▸ Should I close old credit cards I don't use?
Usually no. Closing cards reduces your total available credit, which can raise your utilisation ratio on other cards and hurt your score. Closing your oldest card also reduces the average age of your credit history. Keep no-fee cards open even if dormant; consider closing only annual-fee cards you don't value, or accounts you no longer trust to keep secure.
Editorial accountability
Open Trust Centre →
How UK Tax Drag holds itself to account
Every page is reviewed against the editorial standards, written from primary sources and sourced openly, with corrections listed in the changelog. No affiliate revenue. No sponsored content. No paid placements.
UK Tax Drag is an independent publication by Finsolve Consulting Limited, not affiliated with or endorsed by HMRC, GOV.UK or any government body.