1. What is Bankrate's Minimum Payment Formula?

The Bankrate minimum payment formula estimates how long it will take to pay off credit card debt making only minimum payments, accounting for compound interest. This helps consumers understand the true cost of carrying credit card balances.

2. How Does the Calculator Work?

The calculator uses Bankrate's formula:

Where:

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

Explanation: The formula calculates how many months it would take to pay off the debt if only minimum payments are made and no additional charges are added.

3. Importance of Minimum Payment Calculation

Details: Understanding minimum payment timelines helps consumers make informed decisions about debt repayment strategies and the true cost of carrying balances.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: Why does paying only minimums take so long?
A: Minimum payments are calculated to cover mostly interest with little principal reduction, leading to long payoff periods.

Q2: What's a typical minimum payment?
A: Usually 1-3% of balance or $25-35 (whichever is greater), but varies by issuer.

Q3: How can I pay off debt faster?
A: Pay more than minimum, target highest APR cards first (avalanche method), or consider balance transfers.

Q4: Does this account for changing APRs?
A: No, this assumes fixed APR. Variable rates would change payoff timeline.

Q5: What if I make additional charges?
A: The calculator assumes no new charges. Adding purchases would extend payoff time.