1. What is Credit Card Interest?

Credit card interest is what you're charged when you don't pay off your balance in full each month. In the UK, it's calculated based on your outstanding balance (principal) and your card's Annual Percentage Rate (APR).

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( I \) — Monthly interest charge (GBP)
• \( P \) — Principal balance (GBP)
• \( R \) — Monthly interest rate (APR / 12 as decimal)

Explanation: The APR is divided by 12 to get the monthly rate, then multiplied by your balance to calculate the interest charge.

3. Importance of Interest Calculation

Details: Understanding your monthly interest helps with budgeting and shows the true cost of carrying a balance. Even small balances can generate significant interest over time.

4. Using the Calculator

Tips: Enter your current card balance in GBP and your card's APR percentage. Typical UK credit card APRs range from 18.9% to 24.9%.

5. Frequently Asked Questions (FAQ)

Q1: Is interest charged if I pay my balance in full?
A: No, UK credit cards only charge interest if you don't pay the full statement balance by the due date.

Q2: How can I reduce my credit card interest?
A: Pay more than the minimum payment, consider balance transfer cards with 0% offers, or pay your balance in full each month.

Q3: Does this include compound interest?
A: This calculates simple monthly interest. Actual charges may compound if unpaid interest is added to the principal.

Q4: What's a typical UK credit card APR?
A: Most UK cards range between 18.9% to 24.9% APR, with some going higher for poor credit scores.

Q5: Are there fees not included in this calculation?
A: Yes, this doesn't account for late fees, overlimit fees, or cash advance fees which may apply.