1. What is Credit Card Interest?

Credit card interest is the cost of borrowing money on your credit card. When you carry a balance, the credit card company charges interest based on your principal balance and annual percentage rate (APR).

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( I \) — Monthly interest charge ($)
• \( P \) — Principal balance ($)
• \( R \) — Monthly interest rate (Annual Rate ÷ 12)

Explanation: The formula calculates how much interest accrues each month on your outstanding credit card balance.

3. Importance of Understanding Credit Card Interest

Details: Knowing how interest accrues helps you understand the true cost of carrying a balance and can motivate you to pay down debt faster.

4. Using the Calculator

Tips: Enter your current credit card balance and annual percentage rate (APR). The calculator will show your estimated monthly interest charge.

5. Frequently Asked Questions (FAQ)

Q1: How often is credit card interest calculated?
A: Most credit cards calculate interest daily but charge it monthly based on your average daily balance.

Q2: Does paying the minimum payment avoid interest?
A: No, you'll still accrue interest on any remaining balance after payment.

Q3: How can I reduce my credit card interest?
A: Pay more than the minimum, pay early in the billing cycle, or transfer to a lower-rate card.

Q4: Why is my interest higher than calculated?
A: Some cards have different calculation methods or may charge fees in addition to interest.

Q5: Does this calculator work for compound interest?
A: This shows simple monthly interest. Actual credit cards use daily compounding which may result in slightly higher interest.