Canadian Credit Card Calculator

Credit Card Payoff Formula:

\[ T = \frac{\log\left(\frac{P}{P - D \times R}\right)}{\log(1 + R)} \]

Time to Pay Off:

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1. What is the Credit Card Payoff Calculator?

The Canadian Credit Card Calculator estimates how long it will take to pay off your credit card debt based on your current balance, monthly payment, and annual interest rate (APR). It helps you understand the impact of different payment strategies on your debt repayment timeline.

2. How Does the Calculator Work?

The calculator uses the credit card payoff formula:

\[ T = \frac{\log\left(\frac{P}{P - D \times R}\right)}{\log(1 + R)} \]

Where:

\( P \) — Principal balance (CAD)
\( D \) — Monthly payment (CAD)
\( R \) — Monthly interest rate (APR / 12, as a decimal)
\( T \) — Time to pay off (months)

Explanation: The formula accounts for compound interest and calculates how many months it will take for regular payments to reduce the balance to zero.

3. Importance of Payoff Calculation

Details: Understanding your payoff timeline helps with financial planning, motivates debt repayment, and shows the impact of increasing payments or reducing interest rates.

4. Using the Calculator

Tips: Enter your current credit card balance in CAD, your planned monthly payment in CAD, and your card's annual interest rate (APR). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why does my payment need to exceed the monthly interest?
A: If your payment only covers the interest (or less), your principal balance will never decrease, resulting in infinite payoff time.

Q2: How can I pay off my debt faster?
A: Increase monthly payments, make bi-weekly payments instead of monthly, or transfer to a lower-interest card (if fees don't offset savings).

Q3: Does this account for minimum payments?
A: No, this calculates based on fixed payments. Minimum payments often start at a percentage of balance and decrease over time.

Q4: What if I make additional payments?
A: Extra payments will reduce payoff time. Recalculate with your new average monthly payment amount.

Q5: Are there Canadian-specific considerations?
A: Canadian credit cards typically use compound interest calculated daily but charged monthly. This calculator provides a good estimate for standard Canadian credit cards.