1. What is Credit Card Interest Calculation?

Credit card interest calculation determines the amount of interest charged on outstanding balances during a billing cycle. It helps cardholders understand the cost of carrying balances and make informed financial decisions.

2. How Does the Calculator Work?

The calculator uses the interest formula:

Where:

• \( ADB \) — Average Daily Balance (PHP)
• \( R \) — Annual Interest Rate (%)
• \( D \) — Number of Days in Billing Cycle

Explanation: The formula calculates daily interest by dividing the annual rate by 365 days, then multiplies by the average daily balance and number of days in the billing cycle.

3. Importance of Interest Calculation

Details: Understanding credit card interest helps consumers manage debt, avoid excessive charges, and plan repayments effectively. It's essential for financial planning and debt management.

4. Using the Calculator

Tips: Enter average daily balance in PHP, annual interest rate in percentage, and number of days in the billing cycle. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

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

Q2: Why divide by 365 in the formula?
A: This converts the annual interest rate to a daily rate, as interest is calculated daily on credit cards.

Q3: Are there different interest calculation methods?
A: Some banks may use slightly different methods, but the average daily balance method is most common in the Philippines.

Q4: Does this include other fees and charges?
A: This calculation only covers interest. Other fees like late payment charges or annual fees are separate.

Q5: How can I reduce my credit card interest?
A: Pay your balance in full each month, make payments on time, and consider balance transfer options with lower rates.