1. What is Credit Card Interest?

Credit card interest is the cost of borrowing money on your credit card. It's calculated based on your average daily balance, annual percentage rate (APR), and the number of days in your billing cycle.

2. How Does the Calculator Work?

The calculator uses the standard credit card interest formula:

Where:

• \( ADB \) — Average daily balance ($)
• \( APR \) — Annual percentage rate (as percentage)
• \( Days \) — Number of days in billing cycle
• \( I \) — Interest charge ($)

Explanation: The formula calculates daily interest by converting APR to a daily rate, then multiplies by the average balance and number of days.

3. Importance of Interest Calculation

Details: Understanding how interest is calculated helps consumers make informed decisions about credit card use and repayment strategies to minimize interest charges.

4. Using the Calculator

Tips: Enter your average daily balance in dollars, APR as a percentage (e.g., 18.99), and the number of days in your billing cycle (typically 28-31 days).

5. Frequently Asked Questions (FAQ)

Q1: How is average daily balance calculated?
A: Add up each day's balance in the billing cycle, then divide by the number of days in the cycle.

Q2: Does this include compound interest?
A: This calculates simple interest. Most credit cards compound interest daily, but this gives a close estimate.

Q3: What if I make payments during the cycle?
A: Payments will reduce your average daily balance, lowering your interest charge.

Q4: How can I avoid interest charges?
A: Pay your statement balance in full by the due date each month to avoid interest.

Q5: Why divide by 365?
A: This converts the annual rate to a daily rate, as interest is calculated daily.