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Interest Calculation Formula:
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Credit card interest calculation determines the amount of interest charged on outstanding credit card balances. For HDFC and most banks, interest is typically calculated using the average daily balance method over the billing cycle.
The calculator uses the interest calculation formula:
Where:
Explanation: The formula calculates daily interest by converting the annual rate to a daily rate and multiplying by the average balance and number of days.
Details: Understanding credit card interest helps consumers manage debt effectively, make informed payment decisions, and avoid unnecessary interest charges that can accumulate quickly.
Tips: Enter your average daily balance in currency units, annual interest rate as a percentage, and number of days in the billing cycle. All values must be positive numbers.
Q1: How is average daily balance calculated?
A: ADB is calculated by summing the daily balances throughout the billing cycle and dividing by the number of days in the cycle.
Q2: Does HDFC use this exact formula?
A: While this is the standard method, specific terms may vary. Always check your cardholder agreement for exact calculation methods.
Q3: Are there any additional fees included?
A: This calculator shows only interest charges. Other fees like late payment fees, annual fees, or service charges are not included.
Q4: How can I reduce my credit card interest?
A: Paying your balance in full each month, making payments on time, and maintaining a lower credit utilization ratio can help reduce interest charges.
Q5: Is interest charged from the transaction date?
A: Interest is typically charged from the transaction date unless you have a grace period and pay your statement balance in full by the due date.