This model will allow you to determine how long it will take to pay off your credit card if only the minimum payment is made. The calculations are based on the minimum payments balance formula.
You have control over the following variables: annual percentage rate (APR),
minimum monthly payment percent, the credit card balance, and the number of monthly payments. The calculated
parameters are: the length of time to pay off the debt, and the total amount of interest paid. You can also
scroll the “Month n payment” to follow the amount paid each month.
APR
24%
Minimum monthly payment
5%
Credit card balance
$400
Number of payments
40
0,0
Month 4 payment:
$17.63
Balance payoff:
$352.66
Sum of 4 payments:
$93.99
Total interest paid through 4 payments:
$46.65
This credit card cannot be paid off under these conditions.
Questions
1. Assuming your APR is 10%, your minimum monthly payment is 3%, and your initial credit card balance is
$10,000, how many payments will be required before your outstanding balance is half of the original balance?
2. Does changing the original credit card balance have any effect on how many payments will be required
before your outstanding balance is half of the original balance?
3. Does changing the APR have any effect on how many payments will be required before your outstanding
balance is half of the original balance?
4. Does changing the minimum monthly payment have any effect on how many payments will be required before
your outstanding balance is half of the original balance? Assuming your APR is 8%, your minimum monthly
payment is 4.5%, and your initial credit card balance is $5000, how long will it be before your payments
are less than $50 per month?