Match the tool to the question
| Question | Inputs that matter | Result it cannot promise |
|---|---|---|
| When will this balance be paid? | Rate, accrual method, fees, payment timing and new borrowing | The creditor’s final payoff quote |
| Which debt gets extra money? | All minimums, rates, extra cash and risk priorities | Money available after an unexpected expense |
| Will refinancing cost less? | Net proceeds, fees, rate, term and old balances paid off | Approval or advertised rate eligibility |
| What might settlement save? | Actual offer, fees, accrued balances, unresolved debt and potential tax | Creditor acceptance or a guaranteed tax exclusion |
Read the moving balance, not just the payment
A basic model carries a balance forward: next balance equals current balance plus interest and fees plus new borrowing minus payments. Real contracts determine the order and timing.
A simplified comparison
Assume a $6,000 balance, no fees or new borrowing, monthly interest of 1% and a payment after that month’s interest. These assumptions are illustrative and do not describe every credit card.
| Payment | After month 1 | Month 2 interest | After month 2 |
|---|---|---|---|
| $200 | $5,860 | $58.60 | $5,718.60 |
| $300 | $5,760 | $57.60 | $5,517.60 |
Scroll the table sideways to compare all columns.
The extra $100 payment produces a $201 difference after two months: the two extra payments plus $1 less interest. It does not establish whether $300 fits the household budget.
Check whether a tool assumes a fixed payment or a declining minimum. Those are different paths. A promotional rate that ends, deferred interest, multiple rate buckets or new purchases can materially change the result.
Compare the whole term, even in a simple example
Imagine two hypothetical, interest-free ways to repay $6,000. Plan A requires $500 for 12 months and has no fee: $6,000 total. Plan B requires $300 for 21 months: $6,300 total. Plan B is easier to fit into a month but costs $300 more and lasts nine months longer.
This deliberately simple example uses no interest calculation. It shows why comparing only the monthly amount misses term and total cost. Real refinancing offers also require net proceeds, interest, fees, old-account payoff and collateral analysis. Keep uncertain future borrowing out of the claimed savings, then test it separately if repeat borrowing is a realistic possibility.
Audit the estimate before relying on it
Appendix M 1’s repayment-disclosure method uses defined assumptions and permitted approximation limits. A card statement’s estimate is not a universal affordability assessment, and a home-built tool should not claim regulatory accuracy merely because it uses an interest formula.
- Confirm the balance and rate date.
- See whether fees reduce proceeds or are added to the balance.
- Check payment frequency and first-payment timing.
- Run a lower-income or missed-payment scenario separately.
- Include every debt and fee in the comparison.
- Label taxes and uncertain creditor offers as unresolved, not zero.
For refinancing, compare total payments and the end date as well as the monthly bill. For settlement, compare net outlay with remaining liabilities and risk while waiting. For garnishment and tax, legal classification can matter more than arithmetic; obtain a jurisdiction-specific review.
Save the inputs and assumptions with the result. If they cannot be reconstructed, the attractive number cannot be meaningfully checked.
Sources and further reading
General educational information. The original evidence, dates and recorded qualifications are available in the optional archive below.