💳 Credit Card Calculator
📘 How Credit Card Interest Works
Credit card interest is typically calculated using your average daily balance and a daily periodic rate based on your APR. This calculator simulates how your balance decreases over time as you make payments.
Formula used:
- Daily Periodic Rate = APR / 365
- Daily Interest = Balance × Daily Periodic Rate
- New Balance = Previous Balance + Interest - Payment
Making larger payments or paying more frequently can significantly reduce the total interest you pay.
💡 Debt Payoff Strategies
- Pay more than the minimum payment whenever possible
- Consider the debt avalanche method (paying highest interest debts first)
- Look into balance transfer cards with 0% introductory APR offers
- Set up automatic payments to avoid missed payments and fees
- Create a budget to free up more money for debt repayment
🤔 Frequently Asked Questions
What is APR and how does it affect my payments?
APR (Annual Percentage Rate) is the yearly interest rate charged on credit card balances. A higher APR means you'll pay more in interest over time, making it take longer to pay off your balance with the same monthly payment.
What happens if I only make the minimum payment?
If you only make the minimum payment (typically 1-3% of your balance), it will take much longer to pay off your debt and you'll pay significantly more in interest. This calculator shows the impact of paying more than the minimum.
How can I pay off my credit card debt faster?
To pay off debt faster: 1) Increase your monthly payments, 2) Make bi-weekly instead of monthly payments, 3) Use windfalls (tax refunds, bonuses) to make extra payments, 4) Consider a balance transfer to a lower interest card, or 5) Look into debt consolidation options.
Does this calculator account for additional charges or fees?
This calculator focuses on interest calculations and doesn't account for annual fees, late payment fees, or other charges that might be added to your balance. Always check your credit card terms for complete fee information.
What's the difference between APR and interest rate?
For credit cards, APR and interest rate are typically the same. APR includes the interest rate plus any mandatory fees, but credit cards generally don't have mandatory fees built into the APR calculation like some loans do.