1. What is Credit Card Interest?

Credit card interest is the cost you pay for borrowing money from the credit card issuer. It's calculated based on your outstanding balance and the annual percentage rate (APR) applied to your account.

2. How Credit Card Interest is Calculated

The calculator uses the following method:

Where:

• Outstanding Balance — Current amount owed on the credit card
• Annual Interest Rate — The APR divided by 100
• 12 — Number of months in a year

Explanation: Interest compounds monthly, meaning each month's interest is added to the principal for the next month's calculation.

3. Importance of Understanding Interest

Details: Knowing how interest accumulates helps you make informed decisions about paying down debt and avoiding costly credit card balances.

4. Using the Calculator

Tips: Enter your current credit card balance, the annual interest rate (APR), and the number of months you want to calculate interest for. The calculator assumes no payments are made during this period.

5. Frequently Asked Questions (FAQ)

Q1: How can I reduce my credit card interest?
A: Pay more than the minimum payment, pay early in the billing cycle, or consider a balance transfer to a lower-interest card.

Q2: Is credit card interest compounded daily or monthly?
A: Most credit cards compound interest daily but charge it monthly, using the average daily balance method.

Q3: What's the difference between APR and interest rate?
A: APR includes both the interest rate and any additional fees, giving a more complete picture of borrowing costs.

Q4: Does making minimum payments avoid interest?
A: No, you'll still accrue interest on the remaining balance unless you have a 0% APR promotional period.

Q5: How is interest calculated if I make purchases during the month?
A: Most cards use the average daily balance method, which considers each day's balance during the billing cycle.