1. What is the Credit Card Payoff Calculator?

This calculator estimates how long it will take to pay off your credit card balance in Canada 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 following formula:

Where:

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

Explanation: The formula accounts for the compounding effect of interest on your credit card balance and calculates how many months it will take to pay off the debt with your current payment amount.

3. Importance of Payoff Calculation

Details: Understanding your payoff timeline helps with financial planning, debt management, and evaluating whether you should increase payments or consider balance transfer options.

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 the interest (or less), your balance will never decrease, resulting in infinite payoff time.

Q2: How accurate is this calculator?
A: It provides a good estimate but doesn't account for additional charges, fees, or changes in interest rates.

Q3: What's a good monthly payment amount?
A: Ideally, pay more than the minimum payment. A good target is paying off your balance within 3 years or less.

Q4: Does this work for other types of loans?
A: This formula is specific to credit cards. Mortgages and car loans use different amortization formulas.

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