1. What is Minimum Payment Interest?

The interest charged when only making the minimum payment on a credit card balance. This calculation shows how much interest accrues monthly based on your current balance and APR.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

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

Explanation: The formula calculates the interest you'll pay each month if you only make minimum payments, showing how much of your payment goes toward interest vs. principal.

3. Importance of Interest Calculation

Details: Understanding minimum payment interest helps consumers see the true cost of carrying credit card debt and motivates paying more than the minimum.

4. Using the Calculator

Tips: Enter your current credit card balance and APR. The calculator will show your estimated monthly interest charge if you only pay the minimum.

5. Frequently Asked Questions (FAQ)

Q1: Why does my interest charge change each month?
A: As you pay down principal, the interest is calculated on a smaller balance, so the charge decreases (unless you add new purchases).

Q2: How can I reduce my interest payments?
A: Pay more than the minimum, pay bi-weekly instead of monthly, or transfer to a lower-interest card.

Q3: Is this the same as compound interest?
A: Credit cards typically use daily compounding, but this calculator shows the monthly charge for simplicity.

Q4: Why is my actual interest slightly different?
A: Some cards use daily periodic rates (APR/365) and average daily balance methods.

Q5: Does making minimum payments affect my credit score?
A: While minimum payments keep accounts current, high utilization (balance/limit ratio) can lower scores.