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 follows Credit Karma's methodology for debt payoff simulation.

2. How Does the Calculator Work?

The calculator uses the credit card payoff formula:

Where:

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

Explanation: The formula accounts for compound interest and calculates how many months it will take to reduce the balance to zero with regular payments.

3. Importance of Payoff Calculation

Details: Understanding your payoff timeline helps with financial planning, debt management, and evaluating different payment strategies.

4. Using the Calculator

Tips: Enter your current credit card balance, your planned monthly payment, and the card's 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 the interest (or less), your principal will never decrease, resulting in infinite payoff time.

Q2: How can I pay off my debt faster?
A: Increase your monthly payment, reduce your interest rate (through balance transfers or negotiations), or make biweekly payments.

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

Q4: What if I make additional payments?
A: Additional payments will reduce payoff time. Recalculate with your new payment amount.

Q5: Does this include fees or other charges?
A: No, this calculates based on principal and interest only. Late fees or other charges would extend payoff time.