1. What is Credit Card Monthly Interest?

Credit card monthly interest is the cost of borrowing money on your credit card balance. It's calculated based on your average daily balance, annual percentage rate (APR), and the number of days in your billing cycle.

2. How Does the Calculator Work?

The calculator uses the interest formula:

Where:

• \( ADB \) — Average Daily Balance (USD)
• \( APR \) — Annual Percentage Rate (%)
• \( Days \) — Days in billing cycle

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

3. Importance of Interest Calculation

Details: Understanding how credit card interest is calculated helps consumers make informed decisions about debt management, payment strategies, and credit card usage to minimize interest costs.

4. Using the Calculator

Tips: Enter your average daily balance in USD, annual percentage rate as a percentage, and the number of days in your billing cycle (typically 28-31 days). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is Average Daily Balance (ADB)?
A: ADB is the sum of your daily balances divided by the number of days in the billing cycle. Credit card companies use this to calculate interest.

Q2: How is APR different from interest rate?
A: APR includes both the interest rate and any additional fees, providing a more comprehensive measure of borrowing costs.

Q3: Why divide by 365 in the formula?
A: This converts the annual percentage rate to a daily rate, as interest is typically calculated on a daily basis.

Q4: Can I avoid paying interest?
A: Yes, by paying your full balance by the due date each month, you can avoid interest charges entirely.

Q5: Does this calculator account for compound interest?
A: This calculator provides a simple interest calculation. Actual credit card interest may compound daily, but this gives a close estimate for most purposes.