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 given a fixed monthly payment, accounting for compound interest. 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 (months)

Explanation: The formula accounts for the compounding effect of interest on your remaining balance each month.

3. Importance of Payoff Calculation

Details: Understanding your payoff timeline helps with financial planning, debt management, and comparing repayment strategies. It shows the real cost of making only minimum payments.

4. Using the Calculator

Tips: Enter your current balance, planned monthly payment, and the card's APR. For accuracy, use statements to get exact numbers. Increase payments to reduce payoff time.

5. Frequently Asked Questions (FAQ)

Q1: What if I can't pay more than the minimum?
A: The calculator will show how long minimum payments take (often decades). Even small increases above the minimum can significantly reduce payoff time.

Q2: Does this account for future purchases?
A: No, this assumes no additional charges. For accuracy, stop using the card while paying it off.

Q3: What's a good monthly payment amount?
A: Aim to pay off cards within 3 years. As a rule, pay at least 3% of balance or £5 (whichever is higher), but much more is better.

Q4: How does APR affect payoff time?
A: Higher APR dramatically increases payoff time. A balance of £1,000 at 19.9% APR with £50/month takes 24 months; at 29.9% it takes 28 months.

Q5: Should I prioritize high APR or small balances?
A: Mathematically, targeting highest APR cards first saves most money. Emotionally, some prefer paying smallest balances first for quick wins.