1. What is Credit Card Interest?

Credit card interest is the cost of borrowing money on your credit card when you carry a balance. It's calculated based on your principal balance and annual percentage rate (APR), compounded daily or monthly.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( I \) — Monthly interest charge
• \( P \) — Principal balance (current amount owed)
• \( R \) — Monthly interest rate (APR ÷ 12)

Explanation: This calculates the interest you would pay if you only made the minimum payment, which typically covers mostly interest with little principal reduction.

3. Importance of Interest Calculation

Details: Understanding how interest accumulates helps consumers make informed decisions about paying down credit card debt and avoiding long-term financial strain.

4. Using the Calculator

Tips: Enter your current credit card balance and the APR listed on your statement. The calculator will show how much interest you'll pay if you only make minimum payments.

5. Frequently Asked Questions (FAQ)

Q1: Why does my credit card charge interest?
A: Credit card companies charge interest as the cost of lending you money when you don't pay your full balance each month.

Q2: How can I avoid paying interest?
A: Pay your statement balance in full by the due date each month to avoid interest charges.

Q3: Is this calculation exact for all credit cards?
A: Most cards use daily compounding, so this is an approximation. Actual interest may vary slightly based on billing cycle.

Q4: What's a typical credit card APR?
A: APRs typically range from 15% to 25%, with higher rates for those with poorer credit scores.

Q5: How does making more than minimum payment affect interest?
A: Paying more than the minimum reduces your principal faster, resulting in less interest over time.