1. What is the Credit Card Interest Calculation?

The credit card interest calculation estimates the monthly interest charged on your outstanding balance based on the annual percentage rate (APR). This calculator is designed for UK-style low-interest credit cards used in Australia.

2. How Does the Calculator Work?

The calculator uses the simple interest equation:

Where:

• \( I \) — Monthly interest (AUD)
• \( P \) — Principal balance (AUD)
• \( R \) — Monthly interest rate (APR / 12, as decimal)

Explanation: The equation calculates the interest charged for one month on your outstanding balance, based on the card's APR converted to a monthly rate.

3. Importance of Interest Calculation

Details: Understanding your monthly interest helps with budgeting and demonstrates the cost of carrying a balance on your credit card.

4. Using the Calculator

Tips: Enter your current credit card balance in AUD and the card's APR percentage. The calculator will show your estimated monthly interest charge.

5. Frequently Asked Questions (FAQ)

Q1: Why calculate monthly interest?
A: Knowing your monthly interest helps you understand the true cost of carrying a balance and can motivate paying off debt faster.

Q2: What's considered a low APR in Australia?
A: Typically under 15% p.a. is considered low for Australian credit cards, with some UK-style cards offering even lower rates.

Q3: Does this include compounding interest?
A: This calculates simple monthly interest. Actual charges may compound if you don't pay the full amount each month.

Q4: When is interest typically charged?
A: Most cards charge interest daily but calculate and apply it monthly on your statement date.

Q5: Are there ways to reduce interest?
A: Paying your balance in full each month, transferring to a lower-rate card, or negotiating with your bank can reduce interest.