1. What is the Interest Calculation Formula?

The simple interest formula calculates monthly interest for both credit card debt and savings account earnings. It helps compare how much you pay in credit card interest versus what you could earn in savings interest.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( P \) — Principal balance (INR)
• \( R \) — Monthly interest rate (APR / 12 for credit card or savings rate / 12, as a decimal)
• \( I \) — Monthly interest amount (INR)

Explanation: The calculator computes both credit card interest (what you pay) and savings interest (what you could earn) to show the financial difference.

3. Importance of Interest Comparison

Details: Comparing credit card interest with potential savings interest highlights the opportunity cost of carrying credit card debt. Even small balances can accumulate significant interest charges over time.

4. Using the Calculator

Tips: Enter your current credit card balance, the card's APR (annual percentage rate), and your savings account interest rate. The calculator will show monthly interest amounts for both.

5. Frequently Asked Questions (FAQ)

Q1: Why compare credit card and savings interest?
A: It shows the true cost of credit card debt - not just what you pay, but also what you lose by not having that money in savings.

Q2: What's a typical HDFC credit card APR?
A: HDFC credit cards typically have APRs ranging from 24% to 42% annually (2-3.5% monthly).

Q3: What's a good savings account interest rate?
A: As of 2023, most Indian savings accounts offer 3-7% annually, with some digital banks offering higher rates.

Q4: Does this account for compound interest?
A: This is a simple interest calculation. Actual credit card interest may compound daily, making the real cost slightly higher.

Q5: How can I reduce credit card interest?
A: Pay your balance in full each month, negotiate a lower APR, or transfer balances to lower-interest options.