1. What is the Credit Card Payoff Formula?

The credit card payoff formula calculates how long it will take to pay off credit card debt based on your current balance, monthly payment, and interest rate. This helps Canadians plan their debt repayment strategy.

2. How Does the Calculator Work?

The calculator uses the credit card payoff formula:

Where:

• \( P \) — Principal balance (CAD)
• \( D \) — Monthly payment (CAD)
• \( R \) — Monthly interest rate (APR / 12 as decimal)
• \( T \) — Time to payoff in months

Explanation: The formula accounts for compound interest and shows how increasing payments can dramatically reduce payoff time.

3. Importance of Payoff Calculation

Details: Understanding payoff time helps Canadians make informed decisions about debt repayment strategies and budgeting.

4. Using the Calculator

Tips: Enter your current credit card balance in CAD, your planned monthly payment in CAD, and your card's annual interest rate (APR). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why does my payment need to exceed the interest charge?
A: If your payment only covers interest (or less), your principal won't decrease and you'll never pay off the debt.

Q2: How can I pay off my credit card faster?
A: Increase monthly payments, make bi-weekly payments instead of monthly, or transfer to a lower-interest card.

Q3: Does this account for minimum payments?
A: No, it calculates based on fixed payments. Minimum payments typically extend payoff time significantly.

Q4: What's a good monthly payment amount?
A: Aim to pay at least 2-3% of your balance plus interest charges to make progress on principal.

Q5: How accurate is this calculator?
A: It provides a good estimate assuming fixed payments and interest rates. Actual results may vary slightly.