Credit Card Monthly Minimum Payment

Time to Payoff Formula:

\[ T = \frac{\log\left(\frac{P}{P - MP \times R}\right)}{\log(1 + R)} \]

Time to Payoff:

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1. What is the Minimum Payment Payoff Time?

This calculator estimates how long it will take to pay off credit card debt making only the minimum monthly payments. It accounts for the compounding interest that accumulates on the remaining balance each month.

2. How Does the Calculator Work?

The calculator uses the formula:

\[ T = \frac{\log\left(\frac{P}{P - MP \times R}\right)}{\log(1 + R)} \]

Where:

$ P $ — Principal balance ($)
$ MP $ — Minimum monthly payment ($)
$ R $ — Monthly interest rate (APR / 12)
$ T $ — Time to payoff (months)

Explanation: The formula calculates how many months it will take for the minimum payments to overcome the compounding interest and pay down the principal to zero.

3. Importance of Understanding Payoff Time

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

4. Using the Calculator

Tips: Enter your current credit card balance, the minimum payment amount (or percentage if you know it), and your card's APR. The calculator will show how long it will take to become debt-free making only minimum payments.

5. Frequently Asked Questions (FAQ)

Q1: Why does it take so long to pay off with minimum payments?
A: Minimum payments are typically small (often 1-3% of balance) and most goes toward interest in early years, leaving little to reduce principal.

Q2: What if my minimum payment changes?
A: This calculator assumes fixed minimum payments. If your payment is percentage-based, it will decrease as balance decreases, extending payoff time.

Q3: How can I pay off my card faster?
A: Pay more than the minimum, even small additional amounts can significantly reduce payoff time and total interest paid.

Q4: Why does the calculator say "Never"?
A: If minimum payment ≤ monthly interest, your balance will never decrease because you're not paying down principal.

Q5: Does this account for late fees or other charges?
A: No, this calculates ideal scenario with only interest and your payments. Late fees would extend payoff time further.