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Interest Calculation Formula:
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The Monthly Interest Calculator for UK credit cards calculates the interest charged based on your average daily balance, monthly interest rate, and number of days in the billing cycle. This helps you understand how much interest you'll pay on your credit card balance.
The calculator uses the formula:
Where:
Explanation: The formula calculates interest based on your average daily balance over the billing period, applying the monthly interest rate proportionally to the number of days.
Details: Understanding how credit card interest is calculated helps you manage your finances better, avoid unnecessary charges, and make informed decisions about credit card usage and repayment strategies.
Tips: Enter your average daily balance in GBP, monthly interest rate as a decimal (e.g., 1.5% = 0.015), and number of days in the billing cycle (typically 30). All values must be positive numbers.
Q1: What is average daily balance?
A: The sum of each day's balance divided by the number of days in the billing cycle.
Q2: How do I find my monthly interest rate?
A: Check your credit card statement or agreement. It's typically expressed as an annual percentage rate (APR) that needs to be converted to a monthly rate.
Q3: Why is the denominator 100 × 30?
A: The 100 converts the percentage rate to decimal, and 30 represents the typical number of days used for monthly calculations.
Q4: Does this calculation apply to all UK credit cards?
A: Most UK credit cards use this method, but always check your specific card terms as some may use slightly different calculation methods.
Q5: How can I reduce my credit card interest?
A: Pay your balance in full each month, make payments on time, and consider transferring balances to lower-interest cards if available.