1. What is the Credit Card Payoff Calculator?

This calculator estimates how long it will take to pay off your Canadian 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.

2. How Does the Calculator Work?

The calculator uses the credit card payoff formula:

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 calculates how many months it will take to pay off the debt based on the relationship between your payment, balance, and interest rate.

3. Importance of Payoff Calculation

Details: Understanding your payoff timeline helps with financial planning, shows the true cost of minimum payments, and can motivate you to pay off debt faster.

4. Using the Calculator

Tips: Enter your current credit card balance in CAD, your planned monthly payment in CAD, and your 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 interest (or less), your balance won't decrease and you'll never pay off the debt.

Q2: How accurate is this calculator?
A: It provides a good estimate assuming fixed payments and interest rates. Actual results may vary slightly due to rounding or payment timing.

Q3: What's a good monthly payment amount?
A: Ideally, pay more than the minimum (usually 2-3% of balance). Paying double the minimum can significantly reduce payoff time.

Q4: Does this work for other types of loans?
A: This formula works for credit cards and other debts with compound interest. Mortgages and car loans use different formulas.

Q5: How can I pay off my debt faster?
A: Increase monthly payments, make bi-weekly payments instead of monthly, or consider a balance transfer to a lower-interest card.