1. What is the Credit Card Payoff Calculator?

The Money Advice Credit Card Calculator estimates how long it will take to pay off credit card debt based on your current balance, monthly payment, and interest rate. It uses the standard payoff formula recommended by the Money Advice Service.

2. How Does the Calculator Work?

The calculator uses the following formula:

Where:

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

Explanation: The formula calculates how many months it will take to pay off the debt by accounting for the compounding interest each month.

3. Importance of Payoff Calculation

Details: Knowing your payoff timeline helps with financial planning, understanding the true cost of debt, and motivating debt reduction strategies.

4. Using the Calculator

Tips: Enter your current credit card balance, the fixed monthly payment you can afford, and your card's APR. For accurate results, ensure your monthly payment is more than the monthly interest charge.

5. Frequently Asked Questions (FAQ)

Q1: Why does it say "Never" for payoff time?
A: If your monthly payment is less than the monthly interest charge, your debt will never be paid off as it's growing faster than you're paying it down.

Q2: How can I pay off my credit card faster?
A: Increase your monthly payment, reduce your APR (through balance transfers or negotiation), or make bi-weekly instead of monthly payments.

Q3: Does this account for minimum payments?
A: No, this assumes a fixed monthly payment. Minimum payments often start at 1-3% of balance and change as your balance changes.

Q4: What if I make additional payments?
A: Additional payments will reduce your payoff time. Recalculate with your new average monthly payment amount.

Q5: Is this accurate for multiple credit cards?
A: This calculates for a single card. For multiple cards, calculate each separately or use the total debt and weighted average APR.