1. What is Credit Card Interest Accrual?

Credit card interest accrual refers to how interest charges accumulate on your credit card balance when you carry a balance from month to month. The calculation uses your average daily balance, annual percentage rate (APR), and the number of days in your billing cycle.

2. How Does the Calculator Work?

The calculator uses the daily balance method formula:

Where:

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

Explanation: The formula calculates interest by applying the daily periodic rate (APR/365) to your average daily balance for each day in the billing cycle.

3. Importance of Interest Calculation

Details: Understanding how interest accrues helps consumers make informed decisions about credit card payments and balance management. Even small balances can generate significant interest charges over time.

4. Using the Calculator

Tips: Enter your average daily balance in dollars, APR as a percentage (e.g., 18.99), and the number of days in your billing cycle (typically 28-31). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How is average daily balance calculated?
A: Add up each day's ending balance in the billing cycle, then divide by the number of days in the cycle.

Q2: Does this include compound interest?
A: Most credit cards compound interest daily, which this calculation accounts for.

Q3: What if I make payments during the cycle?
A: Payments reduce your daily balance on the day they're posted, lowering your average daily balance.

Q4: Is this the same as minimum payment?
A: No, this calculates interest only. Minimum payment is typically interest plus 1-3% of principal.

Q5: How can I avoid interest charges?
A: Pay your statement balance in full by the due date each month to avoid interest entirely.