Pigly Credit Card Amortization Calculator

Amortization Formulas:

\[ \text{Interest (month m)} = \text{Outstanding Balance} \times R \] \[ \text{Principal (month m)} = D - \text{Interest (month m)} \]

Total Interest Paid:

Total Months to Payoff:

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1. What is Credit Card Amortization?

Credit card amortization is the process of paying off debt with regular payments over time. Each payment covers both interest charges and reduces the principal balance. Understanding this process helps you see how long it will take to become debt-free and how much interest you'll pay.

2. How Does the Calculator Work?

The calculator uses these amortization formulas:

\[ \text{Interest (month m)} = \text{Outstanding Balance} \times R \] \[ \text{Principal (month m)} = D - \text{Interest (month m)} \]

Where:

$ \text{Outstanding Balance} $ — Remaining principal at start of month ($)
$ R $ — Monthly interest rate (annual rate / 12, as decimal)
$ D $ — Monthly payment amount ($)

Explanation: Each month, interest is calculated on the current balance, then the remaining payment amount goes toward reducing the principal.

3. Importance of Amortization Schedule

Details: An amortization schedule shows exactly how each payment is split between interest and principal, helping you understand the true cost of debt and plan payoff strategies.

4. Using the Calculator

Tips: Enter your current credit card balance, annual interest rate, and the fixed monthly payment you plan to make. The calculator will show your payoff timeline and total interest paid.

5. Frequently Asked Questions (FAQ)

Q1: Why does most of my payment go to interest at first?
A: Early in repayment, your balance is highest so interest charges are largest. As you pay down principal, more of each payment goes toward reducing balance.

Q2: How can I pay off my credit card faster?
A: Increase monthly payments, make biweekly payments instead of monthly, or transfer to a lower-interest card (if fees don't offset savings).

Q3: What's the difference between minimum payment and amortized payment?
A: Minimum payment often covers just interest plus 1% of balance, while amortized payment is calculated to pay off balance in a specific timeframe.

Q4: Does this calculator account for variable rates?
A: No, it assumes a fixed interest rate. For variable rates, results are estimates only.

Q5: Should I pay off highest-rate or smallest-balance cards first?
A: Mathematically, targeting highest-rate cards saves most money. Psychologically, paying smallest balances first can provide motivation through quick wins.