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Credit Card Interest Rates Calculator

Interest Calculation Formula:

\[ I = P \times R \]

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%

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1. What is Credit Card Interest?

Credit card interest is the cost of borrowing money on your credit card. It's calculated based on your outstanding balance and the annual percentage rate (APR) set by your credit card issuer.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

\[ I = P \times R \]

Where:

Explanation: The formula calculates how much interest you'll pay each month on your outstanding credit card balance.

3. Importance of Interest Calculation

Details: Understanding your monthly interest helps with budgeting and shows the true cost of carrying a credit card balance. It can motivate paying off balances faster.

4. Using the Calculator

Tips: Enter your current credit card balance and the APR from your card agreement. The calculator will show your estimated monthly interest charge.

5. Frequently Asked Questions (FAQ)

Q1: How is APR different from interest rate?
A: APR includes both the interest rate and any additional fees, giving a more complete picture of borrowing costs.

Q2: Why is my actual interest sometimes different?
A: This calculator assumes simple interest. Some cards use daily compounding or have different calculation methods.

Q3: How can I reduce my interest payments?
A: Pay your balance in full each month, negotiate a lower APR, or transfer to a lower-rate card.

Q4: What's a good APR for a credit card?
A: Rates vary, but generally under 15% is good for non-promotional rates. Excellent credit can qualify for rates under 12%.

Q5: Does this include compound interest?
A: No, this shows simple monthly interest. Actual charges may be higher if interest compounds daily.

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