1. What is Credit Card Interest?

Credit card interest is the cost of borrowing money on your credit card. In the UK, interest is typically calculated using daily compounding based on your average daily balance, APR (Annual Percentage Rate), and the number of days in your billing cycle.

2. How Does the Calculator Work?

The calculator uses the standard UK credit card interest formula:

Where:

• \( Average\_daily\_balance \) — Your average balance across the billing period (£)
• \( APR \) — Annual Percentage Rate (%)
• \( Days\_in\_billing\_cycle \) — Typically 28-31 days

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

3. Importance of Understanding Credit Card Interest

Details: Knowing how interest is calculated helps you make informed decisions about credit card use, understand the true cost of carrying a balance, and compare different credit card offers.

4. Using the Calculator

Tips: Enter your average daily balance in pounds, the card's APR percentage, and the number of days in your billing cycle (usually shown on your statement). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How is average daily balance calculated?
A: Add up your balance for each day of the billing cycle, then divide by the number of days in the cycle.

Q2: Does this include compound interest?
A: This calculates simple daily interest. Actual credit cards may compound interest daily or monthly.

Q3: What's a typical APR in the UK?
A: UK credit card APRs typically range from 18% to 25%, though some can be higher or lower.

Q4: How can I reduce my credit card interest?
A: Pay your balance in full each month, transfer to a 0% balance transfer card, or negotiate a lower rate with your provider.

Q5: Is interest charged if I pay my balance in full?
A: Usually no, if you pay the full statement balance by the due date. Check your card's terms for grace period details.