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 outstanding balance and the annual percentage rate (APR) of your card. Understanding how interest is calculated can help you manage your credit card debt more effectively.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( I \) — Monthly interest (currency unit)
• \( P \) — Principal balance (current amount owed)
• \( R \) — Monthly interest rate (APR ÷ 12, as decimal)

Explanation: The formula calculates the interest you'll pay each month based on your current balance and the card's APR.

3. Importance of Interest Calculation

Details: Knowing how much interest you're paying helps you understand the true cost of carrying a balance and can motivate you to pay off debt faster.

4. Using the Calculator

Tips: Enter your current credit card balance and the card's APR. The calculator will show your estimated monthly interest charge.

5. Frequently Asked Questions (FAQ)

Q1: How often is credit card interest calculated?
A: Most cards calculate interest daily but charge it monthly based on your average daily balance.

Q2: What's a typical credit card APR?
A: Rates vary but typically range from 15% to 25% APR for most consumer cards.

Q3: How can I reduce my interest payments?
A: Pay your balance in full each month, or make larger payments to reduce principal faster.

Q4: Does this calculator account for compound interest?
A: This shows simple monthly interest. Actual charges may be slightly higher due to daily compounding.

Q5: What if I make purchases during the month?
A: New purchases may be subject to grace periods or immediate interest depending on your card terms.