1. What is the Credit Card Payoff Formula?

The NerdWallet credit card payoff formula calculates how long it will take to pay off credit card debt based on your current balance, monthly payment, and APR. It accounts for compound interest to give an accurate estimate.

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 calculates how many months it will take to pay off debt by accounting for how each payment reduces the principal and how interest compounds monthly.

3. Importance of Payoff Calculation

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

4. Using the Calculator

Tips: Enter your current credit card balance, the fixed monthly payment you can afford, and your card's APR. 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 show infinity (∞) if your payment doesn't cover the monthly interest (payment ≤ principal × monthly rate).

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

Q3: How accurate is this calculation?
A: It's mathematically precise for fixed payments and APR. Actual results may vary if rates change or payments fluctuate.

Q4: Should I include fees in the principal?
A: Only include your current balance. Future fees would require recalculating.

Q5: How can I pay off debt faster?
A: Increase monthly payments, reduce APR (balance transfers/negotiation), or use debt avalanche/snowball methods.