A one-time payment early in the payoff does more than the same money spread over time. On a $9,000 balance at 24.99% with $300 monthly payments, a $2,000 lump sum saves $2,582 in interest and cuts the payoff time from 4 yrs to 2 yrs 9 mos.
Effect of a lump sum applied now
| Lump sum | Time to pay off | Total interest | Interest saved |
|---|---|---|---|
| None | 4 yrs | $5,267 | - |
| $500 | 3 yrs 8 mos | $4,480 | $788 |
| $1,000 | 3 yrs 4 mos | $3,797 | $1,471 |
| $2,000 | 2 yrs 9 mos | $2,685 | $2,582 |
| $3,000 | 2 yrs 3 mos | $1,841 | $3,426 |
Each dollar paid early stops accruing interest at the card rate (24.99% here), which is a guaranteed return well above what most savings accounts offer. Keep a small emergency fund first, so an unexpected expense does not go back on the card.
What we assumed
- Interest is charged monthly at the APR divided by 12 on the remaining balance.
- No new purchases, fees or rate changes after the starting date.
- The lump sum is applied in month 0, and the $300 payment continues monthly.
Related calculators: Credit Card Payoff Calculator, Personal Loan Calculator.
Questions people ask
Should I pay the card or invest the money?
Paying off a 24.99% balance is a risk-free return of that amount. Few investments can reliably beat it.
Estimates for general education, not financial, tax or legal advice. Real results depend on your lender, employer, tax situation and location. See the disclaimer.