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Credit Card Interest Formula:
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The credit card monthly interest calculation determines how much interest you'll pay on your outstanding credit card balance. In India, this is typically calculated using the average daily balance method, which considers your daily balance throughout the billing cycle.
The calculator uses the standard interest formula:
Where:
Explanation: The formula calculates interest based on your average daily balance, applied at the monthly interest rate for the number of days in your billing cycle.
Details: Understanding how credit card interest is calculated helps you manage your finances better, avoid debt accumulation, and make informed decisions about credit card usage and repayment strategies.
Tips: Enter your average daily balance in INR, the monthly interest rate as a percentage (e.g., 3.5 for 3.5%), and the number of days in your billing cycle (typically 30 days). All values must be positive numbers.
Q1: How is Average Daily Balance calculated?
A: ADB is calculated by adding up your daily balances for the billing cycle and dividing by the number of days in the cycle.
Q2: What is a typical credit card interest rate in India?
A: Most Indian credit cards charge between 2.5% to 3.5% monthly interest, which translates to 30-42% annually.
Q3: When is credit card interest charged?
A: Interest is charged when you don't pay your total outstanding balance by the due date mentioned in your statement.
Q4: How can I avoid paying credit card interest?
A: Pay your total outstanding balance in full by the due date every month to avoid interest charges completely.
Q5: Are there any additional charges besides interest?
A: Yes, late payment fees, GST on interest and fees, and other charges may apply depending on your card terms and conditions.