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) set by your credit card issuer.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

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

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

3. Importance of Interest Calculation

Details: Understanding how interest is calculated helps you make informed decisions about paying down debt and comparing credit card offers.

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 is APR different from interest rate?
A: APR includes both the interest rate and any additional fees, giving a more complete picture of borrowing costs.

Q2: Why is my actual interest sometimes different?
A: This calculator assumes simple interest. Actual cards may use daily compounding or have grace periods.

Q3: How can I reduce my credit card interest?
A: Pay more than the minimum, pay on time, or transfer balances to lower-rate cards.

Q4: What's a good APR for a credit card?
A: Rates vary, but generally under 15% is good for standard cards. Rewards cards often have higher APRs.

Q5: Does this include compound interest?
A: No, this shows simple monthly interest. Actual credit cards typically compound interest daily.