Interest Only Credit Card Repayment Calculator

Credit cards typically charge interest on both purchases and cash advances. However, some cards offer interest-only repayment options for qualifying accounts. This calculator helps you determine how much interest you'll pay if you only pay the minimum required and don't pay down the principal balance.

How Interest-Only Credit Card Repayments Work

Most credit cards charge interest on both purchases and cash advances. However, some cards offer interest-only repayment options for qualifying accounts. This means you only pay interest on your balance and don't reduce the principal amount owed.

Key Features of Interest-Only Repayment

Only interest is charged, not principal reduction
Typically available for 6-12 months
Requires maintaining a qualifying balance
Interest is calculated daily on the average daily balance

When to Consider Interest-Only Repayment

Interest-only repayment might be suitable if:

You have a high credit card balance you can't pay off immediately
You need time to save money for a larger payment
You want to avoid paying interest on interest
Your credit card offers a promotional interest rate

Important: Interest-only repayment is not a long-term solution. You must eventually pay down the principal balance to avoid accumulating large interest charges.

How the Calculation Works

The interest-only repayment calculator uses the following formula to determine the total interest you'll pay:

Total Interest = (Average Daily Balance × Daily Interest Rate × Number of Days) / 365

Where:

Average Daily Balance = (Opening Balance + Closing Balance) / 2
Daily Interest Rate = Annual Percentage Rate (APR) / 365
Number of Days = 30 (for monthly billing cycles)

The calculator assumes a 30-day billing cycle, which is standard for most credit cards. The result shows the total interest charged during the interest-only period.

Worked Examples

Example 1: Standard Interest-Only Scenario

Suppose you have a $5,000 credit card balance with a 15.99% APR. You want to use interest-only repayment for 6 months.

Calculate the average daily balance: ($5,000 + $5,000) / 2 = $5,000
Calculate the daily interest rate: 15.99% / 365 ≈ 0.04376%
Calculate total interest: ($5,000 × 0.04376 × 180) / 365 ≈ $1,199.60

Total interest for 6 months: $1,199.60

Example 2: Higher Balance with Lower Rate

You have a $10,000 balance with a 12.99% APR and use interest-only for 3 months.

Average daily balance: ($10,000 + $10,000) / 2 = $10,000
Daily interest rate: 12.99% / 365 ≈ 0.03556%
Total interest: ($10,000 × 0.03556 × 90) / 365 ≈ $850.50

Total interest for 3 months: $850.50

Frequently Asked Questions

What is the difference between interest-only and regular credit card repayment?

With regular repayment, you pay both interest and principal. With interest-only, you only pay interest, which means the principal balance remains the same. This is typically offered as a temporary solution for high balances.

How long can I use interest-only repayment?

Most credit cards offer interest-only repayment for 6-12 months. After this period, you must begin paying down the principal balance or risk accumulating large interest charges.

What happens if I don't pay down the principal balance?

If you continue using interest-only repayment without paying down the principal, your interest charges will keep accumulating. Eventually, the interest could exceed the original balance, making it harder to pay off the card.

Can I switch from interest-only to regular repayment?

Yes, you can switch at any time. However, if you have a high balance, it's often better to pay down the principal as quickly as possible to avoid accumulating large interest charges.