1. What is the Credit Card APR Formula?

The Credit Card APR (Annual Percentage Rate) formula calculates the interest charged on outstanding credit card balances. It considers the average daily balance, annual interest rate, and number of days in the billing cycle.

2. How Does the Calculator Work?

The calculator uses the credit card interest formula:

Where:

• \( I \) — Interest charge (currency)
• \( ADB \) — 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 APR 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 (sum of daily balances divided by days in cycle), APR as percentage, and number of days in billing cycle (typically 28-31).

5. Frequently Asked Questions (FAQ)

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

Q2: Does this include compounding interest?
A: Most credit cards use daily compounding, but this formula shows simple calculation.

Q3: What's a typical credit card APR?
A: Rates vary but often range from 15% to 25% annually for standard cards.

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

Q5: Are there other fees not included here?
A: Yes, cards may have late fees, annual fees, or cash advance fees not reflected in APR calculation.