1. What is Credit Card Interest?

Credit card interest is the cost of borrowing money from your credit card issuer. 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 credit card interest formula:

Where:

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

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 Understanding Credit Card Interest

Details: Knowing how interest is calculated helps consumers make informed decisions about credit card use, payment strategies, and debt management.

4. Using the Calculator

Tips: Enter your average daily balance in dollars, APR as a percentage (e.g., 18.99), and billing cycle length in days (typically 30-31).

5. Frequently Asked Questions (FAQ)

Q1: How is average daily balance calculated?
A: Add up each day's ending 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 for one billing cycle. Most credit cards compound interest daily.

Q3: What's a typical APR?
A: As of 2023, average credit card APR ranges from 16% to 25% depending on creditworthiness.

Q4: How can I reduce credit card interest?
A: Pay your balance in full each month, make payments early in the billing cycle, or transfer to a lower APR card.

Q5: Are there grace periods?
A: Many cards offer interest-free periods if you pay the full statement balance by the due date.