1. What is Interest-Only Credit Card Payment?

An interest-only credit card payment is the minimum amount you can pay to cover just the interest charges without reducing your principal balance. This calculator helps you determine that amount based on your current balance and APR.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( P \) — Principal balance (current amount owed)
• \( R \) — Monthly interest rate (APR divided by 12, expressed as decimal)
• \( Interest \) — Monthly interest payment amount

Explanation: The calculation converts your annual percentage rate (APR) to a monthly rate, then multiplies it by your current balance to determine the interest-only payment.

3. Importance of Interest Calculation

Details: Understanding your interest-only payment helps you budget for minimum payments and shows how much you're paying just in interest without reducing your debt.

4. Using the Calculator

Tips: Enter your current credit card balance and the card's APR. The calculator will show your estimated interest-only payment for one month.

5. Frequently Asked Questions (FAQ)

Q1: Is making interest-only payments a good idea?
A: While it meets minimum requirements, it doesn't reduce your debt. Paying more than the interest helps pay down your balance faster.

Q2: How often does credit card interest compound?
A: Most credit cards compound interest daily, but this calculator provides a simplified monthly estimate.

Q3: Why is my actual minimum payment higher?
A: Most credit cards require minimum payments that include interest plus 1-2% of the principal balance.

Q4: Does this include fees?
A: No, this calculates only interest. Late fees or other charges would be additional.

Q5: How can I reduce my interest payments?
A: Paying down your balance, transferring to a lower APR card, or negotiating with your issuer can help reduce interest.