1. What is the Minimum Payment Calculation?

The minimum payment calculation estimates how long it will take to pay off credit card debt making only the minimum payments. This helps consumers understand the true cost of carrying credit card balances.

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 accounts for compound interest and calculates how many months it takes for the minimum payment to cover both interest and principal.

3. Importance of Understanding Minimum Payments

Details: Making only minimum payments can result in paying significantly more interest over time. This calculator helps visualize the long-term impact of minimum payments.

4. Using the Calculator

Tips: Enter your current credit card balance, the minimum payment amount (or percentage of balance), and your card's APR. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why does it take so long to pay off with minimum payments?
A: Most of your minimum payment goes toward interest in the early stages, with very little reducing the principal balance.

Q2: What if my minimum payment is a percentage of the balance?
A: Convert the percentage to a dollar amount (e.g., 2% of $1000 = $20) and enter that as the minimum payment.

Q3: How can I pay off my debt faster?
A: Pay more than the minimum whenever possible. Even small additional payments can significantly reduce payoff time.

Q4: Why does the calculator say "Never"?
A: This happens when your minimum payment is less than the monthly interest, meaning your balance would grow despite making payments.

Q5: Does this account for changing interest rates?
A: No, this assumes a fixed APR. If your rate changes, you'd need to recalculate.