1. How Credit Card Interest Works

Credit card interest is calculated based on your average daily balance, APR (Annual Percentage Rate), and the number of days in your billing cycle. Interest compounds daily, meaning each day's interest is added to the principal for the next day's calculation.

2. Understanding the Calculation

The calculator uses the following formula:

Where:

• \( balance \) — Your current credit card balance
• \( APR \) — Annual Percentage Rate (as a decimal)
• \( days \) — Number of days in billing cycle (typically 30-31)

Explanation: The APR is divided by 365 to get the daily rate, then multiplied by your balance and the number of days in the billing period.

3. Daily vs Monthly Interest

Daily Interest: Shows how much interest accrues on a single day.
Monthly Interest: Shows the total interest for an entire billing cycle.

4. Using the Calculator

Tips: Enter your current balance, APR percentage, and billing cycle days. Select whether you want daily or monthly interest calculation. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: When is credit card interest calculated?
A: Interest is typically calculated daily but charged at the end of each billing cycle if you carry a balance.

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

Q3: Does making multiple payments reduce interest?
A: Yes, making payments throughout the billing cycle lowers your average daily balance, reducing interest.

Q4: What's the difference between APR and interest rate?
A: APR includes both the interest rate and any fees, giving a complete picture of borrowing costs.

Q5: How does compound interest work on credit cards?
A: Interest compounds daily, meaning each day's interest is added to the principal for the next day's calculation.