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:

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

Explanation: The formula calculates how many months it will take to pay off the balance 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 it takes to pay off debt with minimum payments helps consumers make informed decisions about credit card use and debt repayment strategies.

4. Using the Calculator

Tips: Enter your current credit card balance, the minimum payment amount (or percentage of balance), and the 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 typically small (often 1-3% of balance) and mostly go toward interest in the early years, leaving little to reduce the principal.

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

Q3: How can I pay off my card 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 the principal, fixed payments, and interest.

Q5: What if my APR changes?
A: You would need to recalculate with the new rate. Variable APR cards will have changing payoff times.