1. What is the Credit Card Interest Formula?

The credit card interest formula calculates how much interest you'll pay on your credit card balance 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 (currency unit)
• \( APR \) — Annual percentage rate (as a decimal)
• \( Days \) — Number of days in billing cycle
• \( I \) — Interest (currency unit)

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 credit card interest is calculated helps consumers make informed decisions about payments and debt management.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

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

Q2: Does this include compound interest?
A: No, this is simple interest calculation. Most credit cards compound interest daily.

Q3: What's a typical APR range?
A: Generally 15-25%, but can vary based on creditworthiness and card type.

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

Q5: Does this work for all credit cards?
A: Most standard credit cards use this method, but check your card agreement for specifics.