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:

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

Explanation: The formula breaks down the APR into a daily rate, then multiplies by the average balance and number of days to calculate total interest.

3. Understanding the Components

Average Daily Balance (ADB): The sum of your daily balances divided by the number of days in the billing cycle.

Annual Percentage Rate (APR): The yearly interest rate expressed as a percentage.

Billing Cycle Days: Typically 28-31 days depending on your credit card issuer.

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. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: 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.

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

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

Q4: How can I reduce my credit card interest?
A: Pay your balance in full each month, make payments early in the 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.