1. What is Credit Card Interest?

Credit card interest is the cost of borrowing money when you carry a balance on your credit card. When you only make the minimum payment, interest is calculated on your remaining principal balance each month.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

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

Explanation: The formula calculates how much interest you'll pay each month when only making minimum payments. This assumes no additional charges are made to the card.

3. Importance of Understanding Minimum Payment Interest

Details: Knowing how much interest you pay helps understand the true cost of carrying credit card debt and motivates paying more than the minimum to reduce interest costs.

4. Using the Calculator

Tips: Enter your current credit card balance and annual percentage rate (APR). The calculator will show how much interest you'll pay that month if you only make the minimum payment.

5. Frequently Asked Questions (FAQ)

Q1: Why does my interest charge vary each month?
A: Interest is calculated on your current balance. As you pay down the principal, the interest amount decreases (unless you add new charges).

Q2: How can I reduce my interest payments?
A: Pay more than the minimum, make payments more frequently, or transfer to a lower-interest card.

Q3: Is this the exact interest I'll be charged?
A: This is an estimate. Some cards use daily periodic rates or have different calculation methods.

Q4: Does making minimum payments hurt my credit score?
A: Consistently making only minimum payments may indicate financial stress to lenders, but the main impact comes from your credit utilization ratio.

Q5: What's the best strategy to pay off credit card debt?
A: Either pay highest-interest cards first (avalanche method) or smallest balances first (snowball method) while always paying more than the minimum.