1. What is the Interest Savings Formula?

The Interest Savings Formula calculates the difference in interest payments between two credit card repayment scenarios. It helps quantify savings from either a lower APR or a more aggressive repayment plan.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• \( I_{old} \) — Total interest with original APR/payment plan (in $)
• \( I_{new} \) — Total interest with new APR/payment plan (in $)
• \( S \) — Savings (in $)

Explanation: The formula simply subtracts the new interest amount from the old interest amount to show potential savings.

3. Importance of Interest Savings Calculation

Details: Understanding potential interest savings helps consumers make informed decisions about balance transfers, repayment strategies, and credit card choices.

4. Using the Calculator

Tips: Enter both interest amounts in dollars. The calculator will show the difference between them. Positive values indicate savings.

5. Frequently Asked Questions (FAQ)

Q1: How do I get the interest amounts to compare?
A: Use credit card statements or online calculators to project total interest under different scenarios.

Q2: Does this account for compound interest?
A: The formula itself is simple, but your input values should reflect compound interest calculations if applicable.

Q3: What if I get a negative savings value?
A: This means the new scenario costs more in interest than the original one.

Q4: Can I use this for loans other than credit cards?
A: Yes, the formula works for any interest comparison between two scenarios.

Q5: Should I consider other factors besides interest savings?
A: Yes, also consider fees, credit impact, and your ability to maintain the new payment plan.