1. What is the MoneySmart Credit Card Calculator?

The MoneySmart credit card calculator estimates how long it will take to pay off your credit card debt based on your current balance, monthly payment, and interest rate. It uses a logarithmic formula to provide an accurate payoff timeline.

2. How Does the Calculator Work?

The calculator uses the MoneySmart payoff time formula:

Where:

• \( P \) — Principal balance (AUD)
• \( D \) — Monthly payment (AUD)
• \( R \) — 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 given your monthly payment and interest rate. The logarithmic relationship accounts for the decreasing balance over time.

3. Importance of Payoff Time Calculation

Details: Understanding your payoff timeline helps with financial planning, shows the true cost of minimum payments, and can motivate debt repayment strategies.

4. Using the Calculator

Tips: Enter your current credit card balance in AUD, your planned monthly payment in AUD, and your annual percentage rate (APR). All values must be valid (balance > 0, payment > 0, APR ≥ 0).

5. Frequently Asked Questions (FAQ)

Q1: What if my payment is too low to pay off the debt?
A: The calculator will show "Infinity" if your payment doesn't cover the monthly interest (meaning you'll never pay off the debt).

Q2: Does this account for additional charges?
A: No, this assumes no additional purchases are made on the card during payoff.

Q3: How accurate is this calculator?
A: It provides a mathematical estimate assuming fixed payments and interest rates. Actual results may vary slightly.

Q4: What's the best strategy to pay off credit card debt?
A: Pay as much as you can afford each month, consider balance transfer options, and prioritize high-interest debts first.

Q5: Should I pay more than the minimum payment?
A: Absolutely. Minimum payments often barely cover interest, leading to long payoff times and high total interest paid.