1. What is Daily Interest Calculation?

The daily interest calculation determines how much interest accrues on credit card balances each day based on your average daily balance, annual percentage rate (APR), and the number of days in your billing cycle.

2. How Does the Calculator Work?

The calculator uses the daily interest formula:

Where:

• \( ADB \) — Average Daily Balance ($)
• \( APR \) — Annual Percentage Rate (as percentage)
• \( Days \) — Number of days in billing cycle
• \( I \) — Calculated interest ($)

Explanation: The equation converts APR to a daily rate, then multiplies by the average balance and number of days to determine total interest.

3. Importance of Interest Calculation

Details: Understanding how interest is calculated helps consumers make informed decisions about credit card payments and debt management.

4. Using the Calculator

Tips: Enter your average daily balance (sum of daily balances divided by days in cycle), your APR, and the number of days in your billing cycle (typically 28-31).

5. Frequently Asked Questions (FAQ)

Q1: How is average daily balance calculated?
A: Sum your balance for each day of the billing cycle, then divide by the number of days in the cycle.

Q2: Does this include compound interest?
A: No, this calculates simple daily interest. Most credit cards compound interest daily.

Q3: What's a typical credit card APR?
A: APRs typically range from 12% to 25%, with higher rates for those with poorer credit.

Q4: How can I reduce my interest charges?
A: Pay your balance in full each month, make payments early in the cycle, or transfer to a lower APR card.

Q5: Why divide by 365?
A: This converts the annual rate to a daily rate, as interest is calculated daily on credit cards.