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 simple interest formula:

Where:

• \( I \) — Monthly interest (in dollars)
• \( P \) — Principal balance (current amount owed)
• \( R \) — 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 budgeting and demonstrates how carrying a balance increases your debt over time.

4. Using the Calculator

Tips: Enter your current credit card balance and APR (found on your statement). The calculator shows how much interest you'll pay if you don't make any payments.

5. Frequently Asked Questions (FAQ)

Q1: Is this the exact interest I'll pay?
A: This is an estimate. Some cards use daily compounding or have different calculation methods.

Q2: How can I reduce my interest payments?
A: Pay your balance in full each month, or make larger payments to reduce principal faster.

Q3: What's a good APR for a credit card?
A: Rates vary, but generally under 15% is good. Excellent credit can qualify for rates under 12%.

Q4: Does this include fees?
A: No, this calculates interest only. Late fees or annual fees aren't included.

Q5: Why is my interest higher than this calculation?
A: Some cards compound interest daily or use the average daily balance method.