1. What is Daily Interest Charge?

Daily interest charge is the amount of interest accrued on a loan or credit balance each day. It's calculated by taking the annual interest rate and dividing it by 365 days to get the daily rate, then multiplying by the current balance.

2. How Does the Calculator Work?

The calculator uses the daily interest formula:

Where:

• \( Balance \) — Current account balance (in dollars)
• \( Annual Rate \) — Annual interest rate (as percentage)
• 365 — Number of days in a year

Explanation: The formula converts the annual rate to a daily rate by dividing by 365, then applies it to the current balance.

3. Importance of Daily Interest Calculation

Details: Understanding daily interest helps borrowers see how much they're paying each day in interest charges, which can motivate faster repayment and better financial decisions.

4. Using the Calculator

Tips: Enter your current balance and annual interest rate (as a percentage, not decimal). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why divide by 365 instead of 360?
A: Most modern financial institutions use 365 days for daily interest calculations, though some may use 360 days (which results in slightly higher daily charges).

Q2: Does this account for compound interest?
A: This calculates simple daily interest. For compound interest, the calculation would be more complex as it would include interest on previously accrued interest.

Q3: How can I reduce my daily interest charges?
A: You can reduce daily charges by paying down your balance or negotiating a lower interest rate with your lender.

Q4: Is this the same as APR?
A: APR (Annual Percentage Rate) includes fees and other costs, while this calculation uses just the base interest rate. For precise calculations, use APR if available.

Q5: How accurate is this for credit cards?
A: This provides a good estimate, but credit cards may use slightly different methods like average daily balance calculations.