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 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 standard credit card interest formula:

Where:

• \( I \) — Interest charged (in currency)
• \( ADB \) — Average daily balance (your daily balances summed and divided by days in cycle)
• \( APR \) — Annual percentage rate (as a decimal)
• \( Days \) — Number of days in the billing cycle

Explanation: The formula calculates daily interest by converting APR to a daily rate, then multiplies 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 use, payment strategies, and debt management.

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 28-31 days).

5. Frequently Asked Questions (FAQ)

Q1: How can I reduce my credit card interest?
A: Pay your balance in full each month, make payments early in the billing cycle, or negotiate a lower APR with your card issuer.

Q2: Is APR the same as interest rate?
A: APR includes both the interest rate and any mandatory fees, giving a more complete picture of borrowing costs.

Q3: How is average daily balance calculated?
A: Add up your balance for each day of the billing cycle, then divide by the number of days in the cycle.

Q4: Does making multiple payments reduce interest?
A: Yes, if you make payments before the statement closing date, it lowers your average daily balance.

Q5: What's a typical credit card APR?
A: As of 2023, average APRs range from 15% to 25%, with higher rates for those with lower credit scores.