1. What is Credit Card Interest Charge?

The credit card interest charge is the amount you pay for carrying a balance 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 standard interest charge formula:

Where:

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

Explanation: The formula calculates daily interest by dividing APR by 365 days, then multiplies by the average balance and number of days in the billing cycle.

3. Importance of Interest Calculation

Details: Understanding how interest is calculated helps consumers make informed decisions about credit card usage and repayment strategies to minimize interest charges.

4. Using the Calculator

Tips: Enter your average daily balance in dollars, APR as a percentage (e.g., 15.99), and the number of days in your billing cycle (typically 28-31 days).

5. Frequently Asked Questions (FAQ)

Q1: How is average daily balance calculated?
A: Add up each day's ending balance, then divide by the number of days in the billing cycle.

Q2: Does this include compound interest?
A: No, this calculates simple interest. Most credit cards compound interest daily.

Q3: What if I make payments during the billing cycle?
A: Payments will reduce your average daily balance, thereby reducing interest charges.

Q4: Why divide APR by 365?
A: This converts the annual rate to a daily periodic rate for daily interest calculation.

Q5: How can I reduce my interest charges?
A: Pay your balance in full each month, make payments early in the billing cycle, or negotiate a lower APR.