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 (currency unit)
• \( APR \) — Annual Percentage Rate (as a decimal)
• \( Days \) — Number of days in billing cycle
• \( I \) — Interest charge (currency unit)

Explanation: The formula calculates daily interest by converting APR to a daily rate, then multiplies by the 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 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 28-31 days).

5. Frequently Asked Questions (FAQ)

Q1: How is average daily balance calculated?
A: Sum your balance for each day in the billing cycle, then divide by the number of days in the cycle.

Q2: Does this include compound interest?
A: This calculates simple daily interest. Most credit cards compound interest daily, but this gives a close approximation.

Q3: What if I make payments during the cycle?
A: Payments will reduce your average daily balance, thereby reducing interest charges.

Q4: Are there grace periods?
A: Many cards offer grace periods where no interest is charged if you pay your balance in full each month.

Q5: How can I reduce my interest charges?
A: Pay your balance in full each month, make payments early in the billing cycle, or negotiate a lower APR with your issuer.