1. What is the Credit Card Payoff Formula?

The Martin Lewis 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. It provides a more accurate estimate than simple division by accounting for compound interest.

2. How Does the Calculator Work?

The calculator uses the following equation:

Where:

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

Explanation: The formula accounts for the compounding effect of interest on your credit card balance, showing how much longer it takes to pay off debt when only making minimum payments.

3. Importance of Credit Card Payoff Calculation

Details: Understanding your payoff timeline helps with financial planning, motivates debt repayment, and shows the impact of increasing payments or reducing interest rates.

4. Using the Calculator

Tips: Enter your current credit card balance, your fixed monthly payment amount, and the card's APR. For accurate results, ensure your payment is more than the monthly interest (balance × APR/12).

5. Frequently Asked Questions (FAQ)

Q1: Why does the calculator say my debt will never be paid off?
A: If your monthly payment is less than the monthly interest charged, your balance will grow rather than shrink.

Q2: How can I pay off my credit card faster?
A: Increase monthly payments, transfer to a 0% balance transfer card, or negotiate a lower APR.

Q3: Does this account for minimum payments changing?
A: No, this assumes a fixed monthly payment. Actual minimum payments typically decrease as balance decreases.

Q4: What if I make additional payments?
A: Recalculate with your new higher payment amount to see the reduced payoff time.

Q5: Is this formula specific to UK credit cards?
A: While developed by Martin Lewis for UK consumers, the math applies universally to any compound interest debt.