1. What is the 1% Minimum Payment Calculation?

The 1% minimum payment calculation estimates how long it will take to pay off credit card debt when making only the minimum payment (typically 1% of balance plus interest). This shows the true cost of carrying credit card debt.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( P \) — Principal balance ($)
• \( R \) — Monthly interest rate (APR/12 as decimal)
• \( T \) — Time to pay off (months)

Explanation: The formula accounts for the compounding effect of interest while making minimum payments that are 1% of the current balance.

3. Importance of Understanding Minimum Payments

Details: Making only minimum payments can result in paying significantly more interest over time. This calculator helps visualize the long-term consequences of minimum payments.

4. Using the Calculator

Tips: Enter your current credit card balance and annual percentage rate (APR). The calculator will estimate how long it would take to pay off the debt making only 1% minimum payments.

5. Frequently Asked Questions (FAQ)

Q1: Why does it take so long to pay off with minimum payments?
A: Minimum payments are mostly covering interest, with very little reducing the principal balance, especially in early years.

Q2: What if my minimum payment is more than 1%?
A: This calculator assumes 1% minimum payments. If your card requires higher minimums, the actual payoff time would be shorter.

Q3: How can I pay off my debt faster?
A: Paying more than the minimum, even slightly, can significantly reduce payoff time and total interest paid.

Q4: Does this account for late fees or other charges?
A: No, this calculates only the interest impact. Late fees or other charges would extend the payoff time further.

Q5: What's the best strategy to pay off credit card debt?
A: Pay as much as possible above the minimum, consider balance transfer cards with 0% APR, or explore debt consolidation options.