1. What is Credit Card Interest?

Credit card interest is the cost of borrowing money from your credit card issuer. It's calculated based on your outstanding balance and the annual percentage rate (APR) applied to your account.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

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

Explanation: The formula calculates how much interest you'll pay each month based on your current balance and APR.

3. Importance of Interest Calculation

Details: Understanding your monthly interest helps with budgeting and demonstrates how carrying a balance increases your debt over time.

4. Using the Calculator

Tips: Enter your current credit card balance and the APR from your card agreement. The calculator will show your estimated monthly interest charge.

5. Frequently Asked Questions (FAQ)

Q1: Is this the actual interest I'll pay?
A: This is an estimate. Actual interest may vary based on your card's billing cycle and any changes in your balance.

Q2: How can I reduce my interest payments?
A: Pay your balance in full each month, negotiate a lower APR, or transfer balances to a lower-interest card.

Q3: Does this include compound interest?
A: This shows simple monthly interest. Credit cards typically use daily compounding, which would result in slightly higher charges.

Q4: What if my APR changes?
A: Simply enter the new APR to recalculate your monthly interest.

Q5: Why is my interest higher than this calculation?
A: Your card may use daily compounding, have fees, or you may be looking at a statement that includes multiple months' interest.