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 formula:

Where:

• \( I \) — Monthly interest ($)
• \( P \) — Principal balance at start of month ($)
• \( R \) — Monthly interest rate (APR / 12, as decimal)

Explanation: The calculator shows how interest compounds over time if you only pay the minimum or don't pay at all.

3. Importance of Understanding Interest

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

4. Using the Calculator

Tips: Enter your current credit card balance, the APR (found on your statement), and how many months you want to project. The calculator will show monthly interest charges.

5. Frequently Asked Questions (FAQ)

Q1: How is APR different from interest rate?
A: APR includes both the interest rate and any fees, giving a more complete picture of borrowing costs.

Q2: Does this calculator account for minimum payments?
A: No, this shows interest accumulation without payments. For payment scenarios, use an amortization calculator.

Q3: Why does my interest keep increasing?
A: When interest is added to your balance, you pay interest on the interest - this is compound interest.

Q4: How can I reduce credit card interest?
A: Pay more than the minimum, pay early in the billing cycle, or transfer to a lower APR card.

Q5: Is this calculator accurate for my specific card?
A: It provides estimates. Actual interest may vary based on your card's specific terms and billing cycle.