1. What is the Credit Card Payoff Calculator?

This calculator estimates how long it will take to pay off your credit card debt based on your current balance, monthly payment amount, and annual interest rate (APR). It uses the standard logarithmic formula recommended by MoneySmart.

2. How Does the Calculator Work?

The calculator uses the following formula:

Where:

• \( P \) — Principal balance (AUD)
• \( D \) — Monthly payment (AUD)
• \( R \) — 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 assuming fixed monthly payments and interest rate, with no additional charges.

3. Importance of Payoff Calculation

Details: Knowing your payoff timeline helps with financial planning, comparing repayment strategies, and understanding the true cost of credit card debt.

4. Using the Calculator

Tips: Enter your current credit card balance, the amount you can pay each month, and your card's annual interest rate. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What if my payment is too low to pay off the debt?
A: The calculator will warn you if your payment doesn't cover the monthly interest charges, meaning the debt would never be paid off.

Q2: Does this account for minimum payments?
A: No, this assumes fixed payments. Minimum payments typically extend payoff time significantly.

Q3: How accurate is this calculator?
A: It provides a good estimate assuming no additional charges and fixed interest rates. Actual payoff may vary slightly.

Q4: Should I include fees in the principal?
A: For most accurate results, use your current statement balance including any accrued interest.

Q5: How can I pay off debt faster?
A: Increase monthly payments, reduce spending, or consider balance transfers to lower-interest cards.