1. What is the Monthly Payment Formula?

The monthly payment formula calculates the fixed payment amount needed to pay off credit card debt in a specific timeframe, considering the principal balance and interest rate.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( D \) — Monthly payment ($)
• \( P \) — Principal balance ($)
• \( R \) — Monthly interest rate (APR/12 as decimal)
• \( N \) — Payoff period (months)

Explanation: The formula accounts for compound interest over the payoff period to determine the fixed monthly payment needed.

3. Importance of Payment Calculation

Details: Calculating the exact monthly payment helps with budgeting, debt repayment planning, and understanding the true cost of carrying credit card balances.

4. Using the Calculator

Tips: Enter the current credit card balance, annual percentage rate (APR), and desired payoff period in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why does APR need to be divided by 12?
A: Credit card interest compounds monthly, so we convert the annual rate to a monthly rate for accurate calculations.

Q2: What if I make only minimum payments?
A: Minimum payments (typically 1-3% of balance) will result in much longer payoff times and higher total interest costs.

Q3: How can I pay off debt faster?
A: Increase monthly payments, reduce spending, or transfer balances to lower-rate cards while maintaining disciplined payments.

Q4: Does this account for new charges?
A: No, this assumes no additional charges are made to the card during payoff period.

Q5: What's the best payoff strategy?
A: Either pay highest-rate cards first (mathematically optimal) or smallest balances first (psychological motivation).