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Monthly Interest Formula:
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This calculator determines the monthly interest charged on credit card debt based on your principal balance and annual percentage rate (APR). It helps you understand how much interest you'll pay each month on your outstanding balance.
The calculator uses the simple interest formula:
Where:
Explanation: The calculator first converts your APR to a monthly rate by dividing by 12, then multiplies this rate by your current balance to determine the monthly interest charge.
Details: Understanding your monthly interest charges helps with budgeting and demonstrates how carrying a balance can significantly increase your debt over time. Even small changes in APR can make a big difference in total interest paid.
Tips: Enter your current credit card balance and the card's APR. The calculator will show both your monthly interest charge and the effective monthly interest rate (APR ÷ 12).
Q1: Is this the actual interest I'll pay each month?
A: This is the interest you'd pay if you carried the same balance for the full month. Actual charges may vary slightly based on your billing cycle and any new purchases/payments.
Q2: How can I reduce my credit card interest?
A: Pay your balance in full each month, negotiate a lower APR with your issuer, or transfer balances to a lower-interest card.
Q3: Why is my monthly rate APR/12?
A: APR is annual, so dividing by 12 gives the monthly equivalent. This assumes simple interest without compounding within the month.
Q4: Does this include fees?
A: No, this calculates only interest charges. Some cards may have additional fees that aren't included here.
Q5: How accurate is this for minimum payments?
A: Minimum payments typically cover interest plus 1-2% of principal. This calculator shows only the interest portion.