1. What is the Credit Card Payoff Formula?

The CNN credit card payoff formula estimates how long it will take to pay off credit card debt based on your current balance, monthly payment, and interest rate. It provides a more accurate timeline than simple division by accounting for compound interest.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

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

Explanation: The formula accounts for the compounding effect of interest on your remaining balance each month.

3. Importance of Payoff Calculation

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

4. Using the Calculator

Tips: Enter your current credit card balance, your planned monthly payment amount, and your card's APR. For accurate results, ensure your payment is more than the monthly interest (balance × APR/12).

5. Frequently Asked Questions (FAQ)

Q1: Why does my debt never go down with minimum payments?
A: If your payment is close to just covering the interest, very little goes toward the principal. This calculator shows when payments are insufficient.

Q2: How can I pay off my card faster?
A: Increase monthly payments, reduce spending on the card, or transfer to a lower-interest card. Even small payment increases significantly reduce payoff time.

Q3: Does this account for additional charges?
A: No, this assumes no new charges are added to the card. For accurate results, stop using the card while paying it down.

Q4: What's the difference between APR and interest rate?
A: For credit cards, they're essentially the same - the annual rate used to calculate your monthly interest charges.

Q5: Why does my statement show a different payoff timeline?
A: Statements often assume minimum payments (which may change as balance decreases) or don't account for how payments are applied.