1. What is Bankrate's Minimum Payment Formula?

The Bankrate Minimum Payment Formula calculates how long it will take to pay off credit card debt making only the minimum payments. It accounts for the principal balance, minimum payment amount, and annual percentage rate (APR).

2. How Does the Calculator Work?

The calculator uses Bankrate's formula:

Where:

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

Explanation: The formula calculates how many months it would take to pay off the debt if only minimum payments are made and no additional charges are added.

3. Importance of Minimum Payment Calculation

Details: Understanding how long it takes to pay off debt with minimum payments helps consumers realize the true cost of carrying credit card balances and motivates them to pay more than the minimum.

4. Using the Calculator

Tips: Enter your current credit card balance, the minimum payment amount (or percentage of balance if known), and your card's APR. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why does it take so long to pay off with minimum payments?
A: Minimum payments are typically small (often 1-3% of balance), so most of your payment goes toward interest rather than principal.

Q2: What's a typical minimum payment percentage?
A: Most credit cards require 1-3% of the outstanding balance, often with a minimum dollar amount (e.g., $25).

Q3: How can I pay off my debt faster?
A: Pay more than the minimum, even small additional amounts can significantly reduce payoff time and interest paid.

Q4: Does this account for late fees or other charges?
A: No, this calculation assumes no additional charges are added to the account and payments are made on time.

Q5: What if my minimum payment changes?
A: This calculator assumes a fixed minimum payment. If your payment is percentage-based, the calculation becomes more complex as the balance decreases.