1. What is the Credit Card Payoff Formula?

The credit card payoff formula calculates how long it will take to pay off a credit card balance based on your current balance, monthly payment, and annual interest rate (APR). This helps UK consumers understand their debt repayment timeline.

2. How Does the Calculator Work?

The calculator uses the credit card payoff formula:

Where:

• \( P \) — Principal balance (GBP)
• \( D \) — Monthly payment (GBP)
• \( R \) — 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 your payoff timeline helps with financial planning and shows the true cost of minimum payments. Even small increases in monthly payments can significantly reduce interest costs.

4. Using the Calculator

Tips: Enter your current balance in GBP, your planned monthly payment in GBP, and your card's APR. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why does my payment need to exceed the monthly interest?
A: If your payment only covers interest (D ≤ P×R), you'll never pay off the principal, resulting in "infinite" payoff time.

Q2: How accurate is this calculator?
A: It provides a good estimate assuming fixed APR and consistent payments. Actual results may vary with rate changes or payment adjustments.

Q3: What's a typical UK credit card APR?
A: UK APRs typically range from 18.9% to 24.9% for standard cards, with some going higher. Always check your card's terms.

Q4: How can I pay off my card faster?
A: Increase monthly payments, make biweekly payments, or transfer to a 0% balance transfer card to pause interest.

Q5: Does this work for other loans?
A: This formula works for any fixed-rate debt with compound interest, including personal loans with fixed payments.