1. What is Credit Card Interest?

Credit card interest is the amount you're charged for borrowing money, calculated as a percentage of your outstanding balance. In refinancing scenarios, understanding this interest helps evaluate potential savings from debt consolidation.

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 (APR ÷ 12, as decimal)

Explanation: The formula calculates how much interest accrues each month on your credit card balance before any payments are applied.

3. Importance of Interest Calculation

Details: Knowing your monthly interest helps assess refinancing options, create debt payoff strategies, and understand the true cost of carrying credit card balances.

4. Using the Calculator

Tips: Enter your current credit card balance and APR. For multiple cards, calculate each separately and sum the results. All values must be valid (balance > $0, APR ≥ 0%).

5. Frequently Asked Questions (FAQ)

Q1: How does refinancing affect interest?
A: Refinancing to a lower APR reduces monthly interest charges, helping you pay off debt faster with the same payment amount.

Q2: Is this the same as minimum payment?
A: No, this is just the interest portion. Minimum payments typically include interest plus 1-2% of principal.

Q3: Why calculate monthly interest?
A: It helps compare refinancing offers and shows how much you could save with a lower-rate consolidation loan.

Q4: Does this account for daily compounding?
A: This simplified version uses monthly compounding. Actual credit cards use daily compounding (ADR), making charges slightly higher.

Q5: What's a good APR for refinancing?
A: Ideally below 10%, but any rate lower than your current cards helps. Personal loans often offer better rates than credit cards.