1. What is the Minimum Payment Formula?

The minimum payment formula calculates how long it will take to pay off credit card debt making only the minimum payments each month. It accounts for the principal balance, minimum payment amount, and the card's interest rate.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( P \) — Principal balance ($)
• \( MP \) — Minimum payment ($)
• \( R \) — Monthly interest rate (APR / 12)
• \( T \) — Time to pay off (months)

Explanation: The formula calculates how many months it would take to pay off the debt if you only make minimum payments and don't add new charges.

3. Importance of Minimum Payment Calculation

Details: Understanding how long it takes to pay off debt with minimum payments helps consumers realize the true cost of carrying credit card balances and the benefits of paying more than the minimum.

4. Using the Calculator

Tips: Enter your current credit card balance, the minimum payment amount (typically 1-3% of balance), and your card's APR. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why does it take so long to pay off with minimum payments?
A: Minimum payments are designed to mostly cover interest, paying down very little principal each month.

Q2: What's a typical minimum payment percentage?
A: Most cards require 1-3% of the balance, often with a minimum dollar amount (e.g., $25).

Q3: How can I pay off my card faster?
A: Pay more than the minimum, even small additional amounts can significantly reduce payoff time.

Q4: Does this account for changing interest rates?
A: No, this assumes a fixed APR. Variable rate cards would need recalculating if rates change.

Q5: What if I make additional charges?
A: This calculation assumes no new charges. Adding purchases would increase payoff time.