1. What is Bankrate's Interest Calculation?

This calculator determines the monthly interest charged when making only minimum payments on a credit card, using Bankrate's standard methodology. It helps consumers understand how much interest they'll pay when carrying a balance.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( P \) — Principal balance (current amount owed)
• \( R \) — Monthly interest rate (APR ÷ 12, as decimal)
• \( I \) — Monthly interest charge

Explanation: The calculation shows how much interest accrues each month when only minimum payments are made, which can help illustrate the cost of carrying credit card debt.

3. Importance of Interest Calculation

Details: Understanding monthly interest charges helps consumers make informed decisions about debt repayment strategies and the true cost of minimum payments.

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 when making minimum payments.

5. Frequently Asked Questions (FAQ)

Q1: Why calculate monthly interest?
A: Knowing your monthly interest helps understand how much you're paying just to carry the balance, motivating faster debt repayment.

Q2: Does this include minimum payment calculation?
A: No, this shows only the interest portion. Minimum payments typically include interest plus 1-3% of principal.

Q3: How accurate is this calculation?
A: This provides a good estimate, but actual interest may vary slightly due to daily compounding or billing cycle differences.

Q4: What if my APR changes?
A: Recalculate with your new APR. Variable rate cards may change rates with market conditions.

Q5: How can I reduce my interest payments?
A: Pay more than the minimum, transfer to a lower APR card, or negotiate with your issuer for a better rate.