1. What is Credit Card Interest?

Credit card interest is the cost of borrowing money on your credit card. It's calculated using 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 (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 Understanding Credit Card Interest

Details: Knowing how interest is calculated helps consumers make informed decisions about credit card use, 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 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, then divide by the number of days in the billing cycle.

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

Q3: What if I make payments during the cycle?
A: Payments reduce your daily balance, which would lower the ADB and resulting interest.

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

Q5: Why divide APR by 365?
A: This converts the annual rate to a daily rate for more precise calculations.