1. What is Late Payment Interest?

Late payment interest is the additional charge applied when a credit card payment is not made by the due date. This is calculated using the penalty APR (Annual Percentage Rate) on your unpaid balance.

2. How Does the Calculator Work?

The calculator uses the late payment interest formula:

Where:

• \( I \) — Monthly interest charge
• \( P \) — Unpaid balance
• \( R_{lp} \) — Monthly late payment interest rate (Penalty APR ÷ 12)

Explanation: The calculator converts your penalty APR to a monthly rate, then applies it to your unpaid balance to determine the interest charge.

3. Importance of Calculating Late Payment Interest

Details: Understanding late payment interest helps consumers realize the true cost of missing payments and encourages timely payments to avoid accumulating debt.

4. Using the Calculator

Tips: Enter your unpaid balance in dollars and your penalty APR (as a percentage). The calculator will show the monthly interest that will be charged.

5. Frequently Asked Questions (FAQ)

Q1: How is penalty APR different from regular APR?
A: Penalty APR is typically higher than your regular APR and is triggered when you miss payments or violate other card terms.

Q2: How long does penalty APR last?
A: By law, penalty APR must be removed after 6 consecutive on-time payments, though terms vary by issuer.

Q3: Does this include late fees?
A: No, this calculates only the interest. Late fees are typically $25-$40 and charged separately.

Q4: Can I avoid late payment interest?
A: Yes, by paying at least the minimum amount due by the payment due date each month.

Q5: Does this affect my credit score?
A: Late payments of 30+ days are reported to credit bureaus and can significantly impact your credit score.