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 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 credit card interest formula:

Where:

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

Explanation: The equation calculates daily interest by converting APR to a daily rate, then multiplies by the average balance and number of days.

3. Importance of Interest Calculation

Details: Understanding how interest is calculated helps consumers make informed decisions about credit card use and debt repayment strategies.

4. Using the Calculator

Tips: Enter your average daily balance (sum of daily balances divided by days in cycle), your APR, and the number of days in your billing cycle (typically 28-31 days).

5. Frequently Asked Questions (FAQ)

Q1: How can I reduce my credit card interest?
A: Pay your balance in full each month, make payments early in the cycle, or negotiate a lower APR with your card issuer.

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

Q3: How is average daily balance calculated?
A: Sum your balance for each day of the billing cycle, then divide by the number of days in the cycle.

Q4: Does making multiple payments reduce interest?
A: Yes, making payments throughout the billing cycle lowers your average daily balance, thus reducing interest.

Q5: Are there different types of APRs?
A: Yes, cards may have different APRs for purchases, cash advances, and balance transfers, plus introductory rates.