1. What is Credit Card Interest Calculation?

Credit card interest calculation determines the amount of interest charged on outstanding balances. In the UAE, credit card interest is typically calculated using the average daily balance method with an annual percentage rate applied daily.

2. How Does the Calculator Work?

The calculator uses the interest formula:

Where:

• \( ADB \) — Average Daily Balance (currency units)
• \( R \) — Annual Interest Rate (%)
• \( D \) — Number of days in billing cycle (days)

Explanation: The formula calculates daily interest by converting the annual rate to a daily rate, then multiplies by the average balance and number of days.

3. Importance of Interest Calculation

Details: Understanding credit card interest helps consumers manage debt effectively, make informed financial decisions, and avoid unnecessary interest charges by paying balances promptly.

4. Using the Calculator

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.

5. Frequently Asked Questions (FAQ)

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: Are there different interest calculation methods?
A: While average daily balance is common, some cards may use other methods like daily balance or two-cycle average balance.

Q3: Do all UAE credit cards use 365 days?
A: Most UAE banks use 365 days for interest calculations, but some may use 360 days - check your cardholder agreement.

Q4: When is interest charged on credit cards?
A: Interest is typically charged when you carry a balance past the grace period, which is usually 20-25 days after the statement date.

Q5: How can I avoid paying credit card interest?
A: Pay your full statement balance by the due date each month to avoid interest charges on purchases.