1. What is Credit Card Daily Interest?

Credit card daily interest is calculated based on your average daily balance, annual percentage rate (APR), and the number of days in your billing cycle. Understanding this helps you estimate how much interest you'll pay on carried balances.

2. How Does the Calculator Work?

The calculator uses the daily interest formula:

Where:

• \( ADB \) — Average daily balance ($)
• \( APR \) — Annual percentage rate (as decimal)
• \( Days \) — Number of days in billing cycle
• \( I \) — Calculated interest ($)

Explanation: The formula calculates how much interest accrues daily on your balance, then multiplies by the number of days in your billing cycle.

3. Importance of Interest Calculation

Details: Knowing how interest is calculated helps you understand the true cost of carrying a balance and make informed decisions about paying down credit card debt.

4. Using the Calculator

Tips: Enter your average daily balance (sum of daily balances divided by days in cycle), APR (found on your statement), and billing cycle length (typically 30-31 days).

5. Frequently Asked Questions (FAQ)

Q1: How do I find my average daily balance?
A: Add up your balance for each day in the billing cycle, then divide by the number of days in the cycle.

Q2: Is APR the same as interest rate?
A: APR includes both interest rate and fees, giving a more complete picture of borrowing costs.

Q3: Why divide by 365?
A: This converts the annual rate to a daily rate, as interest is calculated daily on credit cards.

Q4: Does paying early reduce interest?
A: Yes, payments reduce your daily balance, which lowers interest calculations for subsequent days.

Q5: Are there different calculation methods?
A: Some cards use daily periodic rate or adjusted balance methods, but ADB is most common.