Martin Lewis Calculator Credit Cards

Martin Lewis' credit card calculator helps you determine how much you could save by paying off your balance in full each month rather than carrying a balance and paying interest. This tool uses his "Money Saving Expert" method to show the potential savings over time.

How Martin Lewis' Credit Card Calculator Works

Martin Lewis, the founder of Money Saving Expert, advocates for the "balance transfer" method of credit card repayment. His approach suggests that paying off your entire balance each month can save you significant amounts of money compared to carrying a balance and paying interest.

The calculator works by comparing two repayment scenarios:

The current scenario where you carry a balance and pay interest
The Martin Lewis scenario where you pay off the full balance each month

The calculator then shows the difference in interest paid and the total savings over the repayment period.

The Formula

The calculator uses the following formulas to calculate interest and savings:

// Current interest paid currentInterest = (balance * (interestRate / 100)) / 12 // Martin Lewis interest paid lewisInterest = 0 // Total interest paid totalCurrentInterest = currentInterest * months totalLewisInterest = lewisInterest * months // Total savings totalSavings = totalCurrentInterest - totalLewisInterest

Where:

balance - Your current credit card balance
interestRate - Your credit card's annual interest rate
months - Number of months until you pay off the balance

Worked Example

Let's look at an example to see how the calculator works in practice.

Example Scenario

Current balance: £1,000
Interest rate: 18% APR
Repayment period: 12 months

Current Scenario (Carrying Balance)

If you carry this balance for 12 months at 18% APR:

Monthly interest: £15 (18% of £1,000 divided by 12)
Total interest paid: £180
Total paid: £1,180

Martin Lewis Scenario (Paying Off)

If you pay off the balance in full each month:

Monthly interest: £0 (since you're paying off the balance)
Total interest paid: £0
Total paid: £1,000

Savings

By paying off the balance each month, you save:

Total savings: £180
This is the difference between £180 (current interest) and £0 (Lewis interest)

This example shows how paying off your credit card balance each month can save you significant amounts of money compared to carrying a balance.

Frequently Asked Questions

What is Martin Lewis' credit card repayment method?: Martin Lewis recommends paying off your entire credit card balance each month to avoid interest charges. This is known as the "balance transfer" method.
How does the Martin Lewis calculator work?: The calculator compares the interest you would pay by carrying a balance versus paying off the balance each month, showing the potential savings.
Is it always better to pay off credit card balances in full?: While paying off balances in full can save money, it's important to consider your credit score and financial situation. Some credit cards offer rewards for responsible use.
What if I can't pay off my balance in full each month?: If you can't pay off your balance in full, consider making the minimum payment and paying extra when possible to reduce interest charges.
Where can I learn more about Martin Lewis' financial advice?: You can visit the Money Saving Expert website at moneysavingexpert.com for more financial advice and tools.