1. What is the Credit Card Paydown Formula?

The credit card paydown formula estimates how long it will take to pay off credit card debt when making fixed monthly payments, accounting for compound interest.

2. How Does the Calculator Work?

The calculator uses the debt paydown formula:

Where:

• \( P \) — Principal balance ($)
• \( D \) — Monthly payment ($)
• \( R \) — 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 remaining balance each month.

3. Importance of Debt Paydown Calculation

Details: Understanding how long it will take to pay off debt helps with financial planning and motivates debt reduction strategies.

4. Using the Calculator

Tips: Enter your current credit card balance, planned monthly payment, and annual interest rate (APR). The calculator will estimate how many months/years it will take to become debt-free.

5. Frequently Asked Questions (FAQ)

Q1: Why does my payment need to exceed the monthly interest?
A: If your payment only covers interest, your principal balance never decreases and you'll never pay off the debt.

Q2: What's a good monthly payment amount?
A: Ideally, pay more than the minimum payment. A good target is 2-3% of your balance or as much as you can afford.

Q3: How can I pay off debt faster?
A: Increase monthly payments, reduce spending to free up more money, or consider balance transfers to lower-interest cards.

Q4: Does this account for minimum payments changing?
A: No, this assumes fixed payments. Minimum payments typically decrease as your balance decreases.

Q5: What if I make additional payments?
A: Additional payments will reduce your payoff time. Recalculate with your new higher payment amount.