1. What is the Credit Card Payoff Calculator?

This calculator estimates how long it will take to pay off credit card debt using MoneySmart's methodology. It considers your principal balance, monthly payment, and annual interest rate to determine the payoff timeline.

2. How Does the Calculator Work?

The calculator uses the following formula:

Where:

• \( P \) — Principal balance (AUD)
• \( D \) — Monthly payment (AUD)
• \( R \) — Monthly interest rate (APR / 12 as decimal)
• \( T \) — Time to payoff in months

Explanation: The formula calculates how many months it will take to pay off the debt assuming fixed monthly payments and no additional charges.

3. Importance of Payoff Calculation

Details: Understanding your payoff timeline helps with financial planning, debt management, and evaluating different repayment strategies.

4. Using the Calculator

Tips: Enter your current credit card balance, your fixed monthly payment amount, and your card's annual interest rate. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why does my payment need to exceed the interest?
A: If your payment only covers the interest (or less), you'll never pay off the principal debt. The calculator checks this condition.

Q2: How accurate is this calculator?
A: It provides a good estimate assuming fixed payments and interest rates. Actual results may vary with changing rates or payment amounts.

Q3: What if I make additional payments?
A: Extra payments will reduce your payoff time. Recalculate with your new total monthly payment amount.

Q4: Does this account for minimum payments?
A: No, it assumes your payment amount stays constant. Minimum payments typically extend payoff time significantly.

Q5: How can I pay off debt faster?
A: Increase monthly payments, reduce spending, or consider balance transfers to lower-interest cards.