1. What is Interest Only Payment?

An interest-only payment is the minimum amount required to cover just the interest charges on your credit card balance for that month, without reducing the principal balance.

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)

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 estimate minimum payments, plan debt repayment strategies, and see how much you're paying just in interest charges each month.

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 only interest payments a good idea?
A: While it meets minimum requirements, paying only interest means your debt isn't decreasing. It's best to pay more than the interest whenever possible.

Q2: How does APR affect my interest payment?
A: Higher APR means higher interest charges. A lower APR reduces the interest portion of your payment.

Q3: Why is my actual minimum payment higher than this calculation?
A: Most credit cards require minimum payments that include both interest and a small percentage of the principal (typically 1-2% of the balance).

Q4: Does this calculation work for all credit cards?
A: This applies to standard credit cards. Some cards may have different calculation methods or minimum payment requirements.

Q5: How can I reduce my interest payments?
A: Paying down your principal balance, negotiating a lower APR, or transferring to a lower-rate card can all reduce interest charges.