1. What is the Minimum Payment Formula?

The minimum payment formula estimates how long it will take to pay off credit card debt by making only the minimum required payment each month. It accounts for the compounding interest that accumulates on the remaining balance.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( T \) — Time to pay off (months)
• \( P \) — Principal balance ($)
• \( MP \) — Minimum payment ($)
• \( R \) — Monthly interest rate (APR/12 as decimal)

Explanation: The formula calculates how many months it would take to pay off the debt when making minimum payments that cover at least the interest plus a small amount of principal.

3. Importance of Understanding Minimum Payments

Details: Making only minimum payments can result in paying significantly more interest over time. This calculator helps visualize the long-term cost of carrying credit card debt.

4. Using the Calculator

Tips: Enter your current credit card balance, the minimum payment amount (usually 1-3% of balance), and your card's APR. The calculator will show how long it would take to become debt-free.

5. Frequently Asked Questions (FAQ)

Q1: Why does it take so long to pay off with minimum payments?
A: Minimum payments are designed to cover mostly interest with only a small amount going toward principal, which extends the repayment period.

Q2: What if my minimum payment changes?
A: This calculator assumes a fixed minimum payment. In reality, minimum payments decrease as your balance decreases.

Q3: How can I pay off my debt faster?
A: Paying more than the minimum, even slightly, can significantly reduce payoff time and total interest paid.

Q4: Does this account for fees or other charges?
A: No, this calculation only considers interest and principal payments. Late fees or other charges would extend the payoff time.

Q5: What if my APR changes?
A: This calculator assumes a fixed APR. Variable rate cards would require recalculating as rates change.