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Credit Card Interest Comparison Calculator Tool

Credit Card Interest Formula:

\[ I = P \times R \text{ (for each card)} \]

Compares monthly interest for different credit cards.

Where:
P: Principal balance (currency unit)
R: Monthly interest rate (APR / 12, as a decimal, per card)
I: Interest (currency unit)

$

Card 1

%

Card 2

%

Comparison Results

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1. What is Credit Card Interest?

Credit card interest is the amount you're charged for borrowing money, calculated as a percentage of your outstanding balance. The Annual Percentage Rate (APR) determines how much interest accrues on your balance each year.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

\[ I = P \times R \]

Where:

Explanation: The calculator converts each card's APR to a monthly rate, then calculates how much interest would accrue on your balance for one month.

3. Importance of Comparing Interest

Details: Comparing interest rates helps you understand the true cost of carrying balances on different cards. Even small APR differences can lead to significant cost variations over time.

4. Using the Calculator

Tips: Enter your current balance and the APRs for two different cards. The calculator will show you the monthly interest for each and the difference between them.

5. Frequently Asked Questions (FAQ)

Q1: Why compare credit card interest rates?
A: Comparing helps you choose which card to pay down first or avoid using for large purchases, potentially saving you money.

Q2: How often is credit card interest calculated?
A: Most cards calculate interest daily but charge it monthly, using the daily periodic rate (APR ÷ 365).

Q3: Does this calculator account for minimum payments?
A: No, this shows interest only. Minimum payments typically cover interest plus a small percentage of principal.

Q4: What's a good APR for a credit card?
A: As of 2023, average APRs range from 15-25%. Rates below 15% are considered good, while those above 25% are high.

Q5: How can I reduce credit card interest?
A: Pay balances in full each month, negotiate lower rates, transfer balances to lower-APR cards, or consolidate debt with a personal loan.

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