1. What is Interest-Only Payment?

An interest-only payment is the minimum amount due on a credit card that covers just the interest charges for that billing cycle, without reducing the principal balance. This calculation helps understand how much interest you'll pay if you only make minimum payments.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( I \) — Monthly interest payment ($)
• \( P \) — Principal balance ($)
• \( R \) — Monthly interest rate (APR ÷ 12, as decimal)

Explanation: The formula calculates how much interest accrues each month based on your current balance and annual interest rate.

3. Importance of Interest Calculation

Details: Understanding your interest payments helps with budgeting and demonstrates the true cost of carrying credit card debt. Making only minimum payments can lead to significant long-term costs.

4. Using the Calculator

Tips: Enter your current credit card balance and annual percentage rate (APR). All values must be valid (balance > $0, APR ≥ 0%).

5. Frequently Asked Questions (FAQ)

Q1: Is this the same as my minimum payment?
A: Most credit cards set minimum payments as interest + 1% of balance, so your actual minimum may be slightly higher than this calculation.

Q2: How can I reduce my interest payments?
A: Pay more than the minimum, pay down your principal balance, or negotiate a lower APR with your card issuer.

Q3: Does this include fees?
A: No, this calculates only interest charges. Late fees, annual fees, or other charges would be additional.

Q4: Why does my statement show different interest?
A: Some cards use daily periodic rates or have grace periods. This calculator provides an estimate.

Q5: How accurate is this calculation?
A: It's a close estimate for most cards, but check your cardholder agreement for exact terms.