1. What is Interest-Only Credit Card Payment?

An interest-only payment is the minimum amount you would pay if you only covered the interest charges on your credit card balance without reducing the principal. This calculation helps understand the true cost of carrying credit card debt.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( I \) — Monthly interest payment ($)
• \( P \) — Principal balance ($)
• \( R \) — Monthly interest rate (APR / 12, as decimal)

Explanation: The equation calculates how much interest you'll pay each month based on your current balance and annual interest rate.

3. Importance of Understanding Interest Payments

Details: Knowing your interest-only payment helps you understand the minimum cost of carrying debt and motivates paying more than the minimum to reduce principal.

4. Using the Calculator

Tips: Enter your current credit card balance and annual percentage rate (APR). The calculator will show your estimated monthly interest payment.

5. Frequently Asked Questions (FAQ)

Q1: Is this the same as my minimum payment?
A: No, minimum payments usually include some principal plus interest. This shows just the interest portion.

Q2: How can I reduce my interest payments?
A: Pay down your principal balance or negotiate a lower APR with your credit card company.

Q3: Why does my actual payment differ?
A: Actual payments may include fees, different compounding methods, or principal reduction components.

Q4: How often is credit card interest calculated?
A: Most cards use daily compounding, but this calculator provides a monthly estimate for simplicity.

Q5: What if I have multiple APRs on one card?
A: You would need to calculate each portion separately based on the balance at each APR.