1. What is the Credit Card Payoff Formula?

The NerdWallet credit card payoff formula estimates time to pay off credit card debt based on your principal balance, monthly payment, and annual percentage rate (APR). It provides a realistic timeline for becoming debt-free.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

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

Explanation: The formula accounts for compound interest and calculates how long it will take for your payments to overcome the growing interest.

3. Importance of Payoff Calculation

Details: Knowing your payoff timeline helps with financial planning, motivates debt repayment, and shows the impact of paying more than the minimum.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: Why does my payoff time show infinity?
A: This happens when your monthly payment is less than the monthly interest charges, meaning you'll never pay off the debt at that payment rate.

Q2: How accurate is this calculator?
A: It assumes fixed payments and interest rates. Actual payoff may vary if your APR changes or you adjust payments.

Q3: What's the fastest way to pay off credit cards?
A: Pay more than the minimum, target highest APR cards first (avalanche method), or consider balance transfers to lower APR cards.

Q4: Does this work for other loans?
A: This formula works best for credit cards. Mortgage and auto loans use different amortization calculations.

Q5: How can I reduce my payoff time?
A: Increase monthly payments, reduce spending to free up more money for payments, or negotiate a lower APR with your card issuer.