1. What is Daily Interest Calculation?

The daily interest calculation determines how much interest accrues on credit card debt 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 (currency unit)
• \( APR \) — Annual percentage rate (as a decimal)
• \( Days \) — Number of days in billing cycle
• \( I \) — Interest (currency unit)

Explanation: The equation calculates daily interest by converting the APR to a daily rate, then multiplying by the average balance and number of days.

3. Importance of Interest Calculation

Details: Understanding how interest is calculated helps consumers make informed decisions about credit card usage and payment strategies to minimize interest charges.

4. Using the Calculator

Tips: Enter your average daily balance in dollars, APR as a percentage (e.g., 18.99), and the number of days in your billing cycle (typically 30-31). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How is average daily balance calculated?
A: Add up each day's balance during the billing cycle, then divide by the number of days in the cycle.

Q2: Why divide APR by 365?
A: This converts the annual rate to a daily rate since interest compounds daily on most credit cards.

Q3: Does this include compounding interest?
A: This calculates simple daily interest. Actual credit card interest may compound daily.

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

Q5: Is this calculation accurate for all credit cards?
A: Most cards use this method, but check your cardholder agreement for specific terms as some may use slightly different methods.