Credit Card Interest Calculator

What is Credit Card Interest?

Credit card interest is the cost of borrowing money on your credit card. It's calculated based on your card's Annual Percentage Rate (APR) and is charged when you carry a balance from month to month.

The Credit Card Interest Formula

The formula for calculating credit card interest is:

\[I = (B - P) \times \frac{r_a}{12 \times 100}\]

Where:

• \(I\) = Interest charged
• \(B\) = Bill amount (current balance)
• \(P\) = Payment made
• \(r_a\) = Annual interest rate (APR)

Step-by-Step Credit Card Interest Calculation

1. Identify the bill amount (B), payment made (P), and annual interest rate (r_a).
2. Calculate the monthly interest rate by dividing the annual rate by 12 and 100.
3. Subtract the payment from the bill amount.
4. Multiply the result by the monthly interest rate to get the interest charged.

Example Calculation

Let's calculate the credit card interest for a bill of $1,000, a payment of $100, and an APR of 18%:

1. \(B = \$1,000\), \(P = \$100\), \(r_a = 18\%\)
2. Monthly rate = \(18\% \div (12 \times 100) = 0.015\)
3. \(I = (1000 - 100) \times 0.015 = \$13.50\)

Visual Representation

The green portion represents the remaining balance ($900), and the blue portion represents the interest charged ($13.50).