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:

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

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 you 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).

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 paying early reduce interest?
A: Yes, payments reduce your average daily balance, which lowers interest charges.

Q3: Why divide APR by 365?
A: This converts the annual rate to a daily periodic rate for more precise calculations.

Q4: What if I have a grace period?
A: No interest is charged if you pay your full balance by the due date each month.

Q5: How can I reduce credit card interest?
A: Pay your balance in full each month, make payments early in the cycle, or negotiate a lower APR.