1. What is Credit Card Interest Cost?

Credit card interest cost represents the amount you pay for borrowing money on your credit card. It's calculated based on your average daily balance and the annual percentage rate (APR) of your card.

2. How Does the Calculator Work?

The calculator uses the credit card interest formula:

Where:

• \( I \) — Monthly interest cost (currency)
• \( ADB \) — Average daily balance (currency)
• \( r \) — Annual interest rate (decimal)

Explanation: The formula calculates the monthly interest by taking the average daily balance and multiplying it by the monthly interest rate (annual rate divided by 12).

3. Importance of Interest Calculation

Details: Understanding how credit card interest is calculated helps consumers make informed decisions about credit card usage, debt management, and financial planning.

4. Using the Calculator

Tips: Enter your average daily balance in dollars and your annual interest rate as a percentage. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How is average daily balance calculated?
A: Add up each day's balance and divide by the number of days in the billing cycle.

Q2: Does this calculator account for compound interest?
A: This calculates simple monthly interest. Actual credit card interest may compound daily.

Q3: What's a typical credit card interest rate?
A: Rates vary widely but typically range from 12% to 25% APR depending on creditworthiness and card type.

Q4: How can I reduce my credit card interest?
A: Paying your balance in full each month, transferring to a lower-rate card, or negotiating with your issuer.

Q5: Is this calculation accurate for all credit cards?
A: Most cards use similar calculations, but check your cardholder agreement for specific terms.