How to Calculate Credit Card Life

Many people amass high levels of debt on their credit cards without realizing how long it will take to repay the debt, especially if they are only making minimum payments each month. Calculating the time required to pay off balances may help credit card holders better manage debt.

Instructions

Using a Financial Calculator

1

On your credit card statement, locate the following numbers: new balance, APR and minimum payment.
For example, assume the following: New balance = $2,000, APR = 18 percent and minimum payment (usually 4 percent of balance) = $80.

2

Most credit card companies assess interest daily. Calculate the daily interest rate by dividing the APR by 365. For example, 0.18 divided by 365 equals 0.0004931. You now have all the information necessary to determine how long it will take to pay off your credit card.

3




You can calculate credit card life with a calculator.

On your financial calculator, enter the daily interest rate and press "i". For example: 0.0004931= i.

4

Enter the amount of the new balance and press "PV." For example, 2000 = PV.

5

Enter the minimum payment amount and press "PMT." For example, 80 = PMT.

6

Press "N" or "NPER." This will give you the number of payments it will require to pay off the credit card.
In the example: NPER = 24.85 payments of $80 or 2.07 years.

Using a Spreadsheet to Calculate Credit Card Life

7

In the formula bar, type "=NPER(" The formula wizard will appear.

8

In the rate box, type your daily rate, such as 0.0004931 in the example.

9

In the Pmt box, type your minimum payment. In the example, it's 80.

10

In the PV box, type the New Balance. In the example, it's 2,000.

11

Click "OK." In the example, NPER equals 24.85 payments of $80, or 2.07 years.