Credit Card Interest Formula:
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)
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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.
The calculator uses the simple interest formula:
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.
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.
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.
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.