1. What is the Credit Card Repayment Formula?

The credit card repayment formula calculates how long it will take to pay off credit card debt in Canada based on your current balance, monthly payment, and interest rate. It accounts for compound interest to give an accurate repayment timeline.

2. How Does the Calculator Work?

The calculator uses the credit card repayment formula:

Where:

• \( P \) — Principal balance (CAD)
• \( D \) — Monthly payment (CAD)
• \( R \) — Monthly interest rate (annual rate / 12, as decimal)
• \( T \) — Time to repay (months)

Explanation: The formula calculates how many months it will take to pay off the debt by considering the compounding interest and your fixed monthly payment.

3. Importance of Repayment Calculation

Details: Understanding your repayment timeline helps with financial planning, budgeting, and making informed decisions about debt management strategies.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: What if my monthly payment is too low?
A: If your payment doesn't cover the monthly interest (D ≤ P × R), the calculator will show that the debt will never be repaid.

Q2: Does this include minimum payments?
A: No, this calculates repayment based on a fixed payment amount. Minimum payments typically extend repayment time significantly.

Q3: How accurate is this calculation?
A: It's mathematically precise for fixed payments and interest rates, but doesn't account for changing rates or additional charges.

Q4: What's a good monthly payment amount?
A: Ideally, pay more than the minimum. A payment that clears your balance in 3 years or less is generally recommended.

Q5: Does this work for other types of debt?
A: The formula applies to any fixed-rate, fixed-payment debt, but may need adjustment for variable-rate products.