1. What is Credit Card Interest?

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

2. How Credit Card Interest is Calculated

The calculator uses the standard credit card interest formula:

Where:

• \( Balance \) — Your current credit card balance
• \( APR \) — Annual Percentage Rate (as a percentage)
• 12 — Number of months in a year

Explanation: The APR is divided by 12 to get the monthly rate, which is then multiplied by your balance to determine the monthly interest charge.

3. Understanding APR

Details: APR represents the annual cost of borrowing, including interest and fees. Credit card APRs typically range from 12% to 30% depending on your creditworthiness.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: When is interest charged on credit cards?
A: Interest is charged when you carry a balance past the grace period (usually 21-25 days after statement closing).

Q2: How can I avoid paying interest?
A: Pay your full statement balance by the due date each month to avoid interest charges.

Q3: Does this calculator account for daily compounding?
A: This shows a simplified monthly calculation. Actual interest may vary slightly due to daily compounding.

Q4: What's the difference between APR and interest rate?
A: For credit cards, they're essentially the same since fees are typically included in the rate.

Q5: How can I reduce my credit card interest?
A: Pay more than the minimum, transfer to a lower APR card, or negotiate with your issuer for a better rate.