Pay Down Your Consumer Debt

Just because the calculator may allow for the input of future purchases, it's important to be realistic about future spending. It's much harder to pay down debt if spending can't be controlled.

Let's say a consumer has the median amount of debt -- $2,200 -- and is making payments of $100 a month (just a little over the estimated minimum payment of 4% of the balance). If the balance on the credit card is 17.5% and no further purchases are placed on the card, it will take just under 27 months for the balance to be paid down. An interest rate of 17.5% may be high. But a consumer could consider himself lucky - some cards charge interest rates of 22% or more.

What if a consumer can't cut himself off from his credit cards and expects to add as little as $200 a month in additional expenses> He'll need to pay $302 a month to bring his balance to zero in 27 months.

The timelines on the calculator and the monthly payment amounts can be fiddled with to find the right combination that works for a particular situation. The calculator offers a range of scenarios at different payoff intervals based on starting information.

The calculator works best for a single account. But it also can be helpful if balances are carried on several credit cards with roughly the same interest rate. If cards carry different rates, a set of numbers can be run through the calculator separately to get an idea of how long it will take if paying just the minimum for each card. But when it comes time to planning how to pay them off, begin with the account with the highest rate.