1. What is the Minimum Payment Formula?

The formula estimates how long it will take to pay off credit card debt making only minimum payments, considering your current balance, minimum payment amount, and interest rate.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( P \) — Principal balance ($)
• \( MP \) — Minimum payment ($)
• \( R \) — Monthly interest rate (APR / 12)
• \( T \) — Time to pay off (months)

Explanation: The formula calculates how many months it would take to pay off the debt when making fixed minimum payments that cover at least the interest charges.

3. Importance of Calculating Payoff Time

Details: Understanding how long it takes to pay off debt with minimum payments helps consumers realize the true cost of carrying credit card balances and motivates paying more than the minimum.

4. Using the Calculator

Tips: Enter your current balance, typical minimum payment (often 1-3% of balance), and your card's APR. The calculator shows how long it would take to become debt-free making only minimum payments.

5. Frequently Asked Questions (FAQ)

Q1: Why does my debt never get paid off?
A: If your minimum payment is less than the monthly interest charges, your balance will grow rather than shrink.

Q2: How can I pay off debt faster?
A: Pay more than the minimum, even small additional amounts can significantly reduce payoff time.

Q3: Does this account for changing interest rates?
A: No, this assumes a fixed interest rate. Variable APR cards may take longer to pay off.

Q4: What if my minimum payment changes?
A: This calculator assumes a fixed minimum payment amount. Many cards calculate minimum payments as a percentage of balance.

Q5: How accurate is this estimate?
A: It's a mathematical estimate. Actual payoff time may vary slightly due to rounding in payments or billing cycles.