1. What is Credit Card Interest on Loan?

When using a credit card as a loan (through cash advances or balance transfers), interest accrues monthly based on your principal balance and annual percentage rate (APR). Understanding this cost helps in financial planning and debt management.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( I \) — Monthly interest cost
• \( P \) — Principal balance (amount borrowed)
• \( R \) — Monthly interest rate (APR ÷ 12, expressed as decimal)

Explanation: The formula calculates how much interest you'll pay each month on your credit card balance when used as a loan.

3. Importance of Interest Calculation

Details: Knowing your monthly interest cost helps you understand the true cost of borrowing via credit card, plan repayment strategies, and compare with other loan options.

4. Using the Calculator

Tips: Enter your current credit card balance (principal) and the card's APR. The calculator will show your estimated monthly interest cost.

5. Frequently Asked Questions (FAQ)

Q1: Is this the same as minimum payment?
A: No, this is just the interest portion. Your minimum payment would include this interest plus a percentage of principal.

Q2: Does this account for compound interest?
A: This shows simple monthly interest. Actual costs may be higher if interest compounds daily.

Q3: What if I make payments during the month?
A: This calculator assumes constant balance. Making payments would reduce principal and subsequent interest.

Q4: Are there other fees with credit card loans?
A: Cash advances often have additional fees (3-5% of amount) and higher APRs than purchases.

Q5: How can I reduce these interest costs?
A: Pay more than minimum, transfer to lower-rate cards, or consider personal loans with fixed terms.