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. 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 will take to pay off the debt when making fixed minimum payments that cover at least the interest plus a small amount of principal.

3. Importance of Minimum Payment Calculation

Details: Understanding how long minimum payments will take helps consumers realize the true cost of carrying credit card debt and motivates paying more than the minimum.

4. Using the Calculator

Tips: Enter your current credit card balance, the minimum payment amount (or percentage 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 be small (often 1-3% of balance) so most of your payment goes toward interest rather than principal.

Q2: What if my minimum payment changes?
A: This calculation assumes a fixed minimum payment. If your payment is a percentage of balance, the time may be longer as your balance decreases.

Q3: How can I pay off my debt faster?
A: Paying more than the minimum, even slightly, can dramatically reduce payoff time and total interest paid.

Q4: Does this account for late fees or other charges?
A: No, this is a simplified calculation that only considers principal, interest, and minimum payments.

Q5: What if I get a different result from my credit card company?
A: Credit card statements may use slightly different methods or account for variable rates. This provides a close estimate.