1. What is Credit Card Interest?

Credit card interest is the cost of borrowing money on your credit card. It's calculated based on your outstanding balance and the annual percentage rate (APR) set by your credit card issuer.

2. How Does the Calculator Work?

The calculator uses the credit card interest formula:

Where:

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

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

3. Importance of Interest Calculation

Details: Understanding your monthly interest helps with debt repayment planning and shows the true cost of carrying a balance on your credit card.

4. Using the Calculator

Tips: Enter your current credit card balance and APR. The calculator will show your estimated monthly interest charge if you don't pay off the balance.

5. Frequently Asked Questions (FAQ)

Q1: How is APR different from interest rate?
A: APR includes both the interest rate and any additional fees, giving you the total annual cost of borrowing.

Q2: When is interest charged on credit cards?
A: Interest is typically charged when you carry a balance past the grace period (usually 21-25 days after statement closing).

Q3: How can I reduce my credit card interest?
A: Pay your balance in full each month, negotiate a lower APR, or transfer balances to a lower-interest card.

Q4: Does this calculator account for daily compounding?
A: This shows a simplified monthly calculation. Actual credit cards typically use daily compounding (divide APR by 365 for daily rate).

Q5: What's a good APR for a credit card?
A: As of 2023, average APRs range from 15-25%. Rates below 15% are considered good, while those above 25% are high.