1. What is the Bankrate Minimum Payment Formula?

The Bankrate Minimum Payment Formula estimates how long it will take to pay off credit card debt making only 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 will take to pay off the debt when making only minimum payments, considering the compounding interest.

3. Importance of Minimum Payment Calculation

Details: Understanding how long it takes to pay off debt with minimum payments helps consumers make informed decisions about credit card use and debt repayment strategies.

4. Using the Calculator

Tips: Enter your current credit card balance, the minimum payment amount (either fixed or percentage-based), 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) and mostly go toward interest in the early years, not principal.

Q2: What if my minimum payment changes?
A: This calculator assumes fixed minimum payments. If your minimum is a percentage of balance, results will be approximate.

Q3: How accurate is this calculator?
A: It provides a good estimate but doesn't account for late fees, payment changes, or balance changes from new purchases.

Q4: What does "Never" mean in the results?
A: If your minimum payment doesn't cover the monthly interest, your debt will never be paid off with minimum payments alone.

Q5: How can I pay off my debt faster?
A: Pay more than the minimum, reduce spending, transfer to a lower-interest card, or consider debt consolidation.