1. What is the Minimum Payment Interest Calculation?

This calculator determines how much interest you'll pay each month when only making minimum payments on your credit card. It uses the principal balance and annual percentage rate (APR) to estimate the monthly interest charge.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

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

Explanation: The calculation converts the annual APR to a monthly rate by dividing by 12, then multiplies by the current balance to find the monthly interest charge when making minimum payments.

3. Importance of Interest Calculation

Details: Understanding how interest accumulates when making only minimum payments helps consumers see the true cost of carrying credit card debt and motivates paying more than the minimum.

4. Using the Calculator

Tips: Enter your current credit card balance in GBP and the card's APR percentage. The calculator will show the estimated monthly interest charge if you only pay the minimum amount.

5. Frequently Asked Questions (FAQ)

Q1: Why does my actual interest sometimes differ?
A: This calculation assumes no new purchases and a constant balance. Actual interest may vary due to daily compounding, new charges, or grace periods.

Q2: How can I reduce my interest payments?
A: Pay more than the minimum, make payments early in the billing cycle, or consider balance transfer cards with 0% interest periods.

Q3: What's a typical minimum payment?
A: Usually 1-3% of the balance plus any interest/fees, or a fixed minimum amount (often £5-25) if the percentage would be lower.

Q4: Does this include fees?
A: No, this calculates interest only. Some cards may charge additional fees that would increase your minimum payment.

Q5: How accurate is this for multiple cards?
A: You'll need to calculate each card separately as APRs and balances may differ across cards.