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 credit card interest formula:

Where:

• \( ADB \) — Average Daily Balance (in currency units)
• \( APR \) — Annual Percentage Rate (as a decimal)
• \( Days \) — Number of days in billing cycle
• \( I \) — Calculated Interest (in currency units)

Explanation: The formula calculates daily interest by converting APR to a daily rate, then multiplies by the 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.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

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

Q2: Does this include compound interest?
A: This calculates simple daily interest. Most credit cards compound interest daily.

Q3: What's a typical credit card APR?
A: APRs typically range from 15% to 25%, depending on creditworthiness and card type.

Q4: How can I reduce credit card interest?
A: Pay your balance in full each month, or make larger payments to reduce your average daily balance.

Q5: Does this work for all credit cards?
A: This is the standard calculation method, but check your card agreement for specific terms.