Monthly Payment Formula:
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The credit card payment formula calculates the fixed monthly payment needed to pay off a credit card balance in a specified time period, treating it as an installment loan with compound interest.
The calculator uses the standard loan payment formula:
Where:
Explanation: The formula accounts for compound interest over the repayment period, calculating a fixed payment that covers both principal and interest.
Details: Calculating exact monthly payments helps consumers understand the true cost of carrying credit card debt and plan effective payoff strategies.
Tips: Enter current balance (including any interest charges), the card's APR, and desired payoff period in months. All values must be positive numbers.
Q1: Is this the same as minimum payments?
A: No, minimum payments are typically much lower and would result in much longer payoff times and higher total interest.
Q2: What if I pay more than the calculated amount?
A: Paying more will reduce your payoff time and total interest paid. The calculator shows the exact payment needed for your specified timeline.
Q3: Does this account for new charges?
A: No, this assumes no additional charges are made to the card during the payoff period.
Q4: Why is my monthly payment so high?
A: High APRs and short payoff periods result in higher payments. Consider extending your timeline if the payment is unaffordable.
Q5: How accurate is this calculation?
A: Very accurate for fixed-rate cards. For variable-rate cards, the payment may need adjustment if rates change.