The Credit Card Payoff Calculator is provided as part of the AICPA’s Feed the Pig financial literacy program. The calculator computes the necessary payment required to pay off a credit card balance. Users enter their current credit card balance, current monthly payment, interest rate, desired number of months by which to pay off the credit card account, new charges each month, annual fee, and up to two major purchases in the future.
The calculator generates the minimum monthly payment needed to pay off the account. The user may select two views: (1) a graph showing the number of months to pay off the account with the recommended payment; or (2) a graph of the monthly payments needed to pay off the account in 12, 24, 36, 48, and 60 months.
Links to the AICPA’s Feed the Pig and 360 Financial Literacy websites, a financial literacy site for “tweens” and their teachers, as well as financial literacy articles and applications are also provided on the website.
Type of Material:
(1) As individual or team homework assignment.
(2) As a planning tool to determine the required payment needed to pay off a credit card account.
Web browser (Mozilla 3.0.10 used during review).
Identify Major Learning Goals:
To demonstrate the payments and time required to pay off a credit card balance. In so doing, the intention is to demonstrate the wisdom of using credit cards sparingly.
Target Student Population:
Introductory financial literacy course offered in middle school, high school, or lower division college.
Other teachers of middle through high school to demonstrate the need to use credit cards wisely.
Parents could use the calculator to teach their children about the wise use of credit.
Anyone interested in financial literacy and reducing their credit card debt balance.
Prerequisite Knowledge or Skills:
Basic computer skills required.
Evaluation and Observation
This simulation provides accurate estimations of the required payment needed to pay off a credit card balance. Content is current, relevant, and particularly timely given the indebtedness of many individuals.
Clear definitions are given for each variable.
The module graphically illustrates the difference between current regular monthly repayment patterns and required monthly payment patterns to achieve a specified time period for repayment. This feature clearly communicates the length of time needed to pay off the account.
The calculator allows the user to enter up to two planned future purchases in order to show the effect on the payoff term.
While the user can enter any number of variables, the calculator will only return the minimum payment needed to pay off the account for a given period of time. Users cannot, for example, solve for the length of time to pay off the account given a set payment amount.
No discussion is given other than “Use this calculator to see how long it will take to get out of your hole...”
This tool has a very focused use rather than being a self-contained lesson on credit card debt. As a result instructor provided context will very likely be required. For example, the calculator should be used after students have an understanding of the principles of interest.
Potential Effectiveness as a Teaching Tool
The Credit Card Payoff Calculator is an excellent tool for illustrating and managing credit card debt. It incorporates most of the possible options that might be of interest to users. It quickly provides feedback both numerically and graphically regarding debt repayment.
This tool could be used to show the impact of debt repayment, in general, by setting most of the factors to zero.
It can be used by a varied target audience, including middle school through adult education, to improve financial literacy about managing credit card debt.
No prerequisite knowledge is identified and an understanding of interest would be very helpful.
The calculator serves only one purpose: determine the payment needed to pay off a credit card balance. As such, any assignments would necessarily be limited to this purpose.
No discussion of financial literacy concepts underpinning the calculator other than “Because credit card debt is like a barnyard bug – it sneaks up on you, and it’s very hard to shake.”
Context is likely required to use this simulation as an effective teaching tool. As a result, the simulation is not self-contained for individuals unfamiliar with the required concepts.
Concepts are not reinforced professively, nor are relationships between concepts explicitely discussed, but rather left to the user to discover.
Ease of Use for Both Students and Faculty
Easy to use.
Professionally designed web site that is visually appealing.
Good interactivity to engage learners.
Provides clear definitions of the variables included in the calculator
Incorporates most of the options applicable and very quickly and effectively shows and illustrates credit card debt repayment.
Great cash flow planning tool!
Instructions are limited to “Use this calculator to see how long it will take to get out of your hole...” and requires a trial by trial approach.
No "print" button exists, although the user could still either use the browser's print command or use a screen capture.