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:

Where:

• \( I \) — Monthly interest amount
• \( P \) — Principal balance (current amount owed)
• \( R \) — Monthly interest rate (APR ÷ 12 ÷ 100)

Explanation: This calculates the interest you would pay for one month if you carried the balance without making any payments.

3. Importance of Understanding Credit Card Interest

Details: Knowing how interest is calculated helps you understand the true cost of carrying a balance and motivates faster debt repayment.

4. Using the Calculator

Tips: Enter your current credit card balance and the annual percentage rate (APR) from your credit card statement. The calculator will show your estimated monthly interest charge.

5. Frequently Asked Questions (FAQ)

Q1: Is this how credit card companies actually calculate interest?
A: Most use daily compounding, but this simple monthly calculation gives a good estimate of your interest charges.

Q2: What if I make a payment during the month?
A: This calculator assumes no payments. Actual interest may be lower if you make payments before the billing cycle ends.

Q3: Why is my actual interest sometimes different?
A: Some cards charge interest from the purchase date, not just the statement date. Fees may also be included in your statement.

Q4: How can I reduce my credit card interest?
A: Pay your balance in full each month, negotiate a lower APR, or transfer to a lower-interest card.

Q5: Does this include compound interest?
A: No, this is simple interest. For compound interest, interest would be added to the principal each month.