Credit Card Interest Calculator Calculate Monthly Interest Levied

Credit Card Interest Calculator

A Credit Card Interest calculator can calculate the amount of interest that shall be levied when the credit card holder repays only the minimum or partial amount or doesn’t pay the full amount due.

About Credit Card Monthly Interest Calculator

The formula for calculating the Credit Card Monthly Interest calculator is as below:

Credit Card Interest Calculator

D * A * I * 12 / 365

D is the number of days that are counted from the date of purchase.
A is the total outstanding amount.
I is the interest rate per month.

Wherein,

D is the number of days that are counted from the date of purchase.A is the total outstanding amount.I is the interest rate per month.

After the introduction of plastic money, the lifestyle of people changed, and they started using credit cards especially excessively. Some used to clear the entire debt, while some used to pay the minimum amount due, and some used to pay the partial amount per their finance availability. However, they didn’t realize that if the entire amount was not paid, a heavy interest rate was charged, enhancing their debt. There could be multiple reasons for not paying the entire amount, either due to the unavailability of finance or missing the deadline to repay the credit card debt. Because of this, banks earn a large amount of interest on credit card debt since the rate of interest charged is higher than normal personal loans.

How to Calculate Using Credit Card Interest Calculator?

One needs to follow the below steps to calculate the Credit Card Interest.

Step #1: First, the credit card holder needs to determine the current Credit Card debt outstanding balance, which is nothing but finding out the spending done in the last credit card billing cycleBilling CycleThe billing cycle is the time period between one billing statement and the next billing date that companies generate for its services and products sold to the customers. The cycle could be monthly, quarterly or even annually. read more and any opening balance, if any.

Step #2: Now, calculate the days since that last transaction date.

Step #3: Determine the monthly rate of interest since the credit card is billed monthly.

Step #4: Calculate the interest amount by multiplying the amount determined in step 1 by the number of days determined in step 2 and then multiplying by the rate of interest determined in step 3.

Step #5: The resultant figure will be the interest that has to be paid on credit card debt.

Example #1

Mr. Le has been using a credit card for a long period. Further, for the current credit card billing cycle, for which the due date is 6th August, he has done the following transactions:

Insurance Payment $8500Bills Payment $175

The transaction date for insurance and bill payments was made on 1st July. Mr. Le has paid 50% of the amount due by 21st July; however, the due date was 26th July.

The Bank levies a 19% rate of interest per annum.

You must calculate the interest he would be paid by 6th August.

Solution

We will first calculate the credit card outstanding balance below, assuming that there is no opening balance.

Mr. Le has paid only 50% of the total amount due, which is $8,675, which is $4,337.50, and since the entire amount is not paid, Mr. Le would be liable to pay interest on the entire outstanding amount and as well on the transactions till the date of payment.

The number of days on which interest would be paid on the entire amount of $8,675 will be from 1st July till 21st July, which is for 20 days.

Secondly, the number of days for which interest would be paid on the partial amount after 1st payment made, which is $8,675 – $4,337.50, which is $4,337.50, will be from 22nd July till 6th August, which is 16 days.

Interest per month will be 19% / 12, which is 1.58%

Now we can use the formula below to calculate the interest to be paid on the credit card debt.

= 20 * 8675 * 1.58% * 12 / 365= $90.32

Now we shall calculate interest on the outstanding balance from the 1st payment date, which is $4,337.50, till the next payment cycle, which is 6th August, i.e., for 16 days.

= 16 * $4337.50 * 1.58% * 12 / 365= $36.13

Therefore, the total interest due for the credit cycle from 6th July till 6th Aug will be $90.32 + $36.13, which is $126.44.

Conclusion

It is too appealing for the consumers to buy their favorite products when they get credit in hand and pay every month or delay the payment until they can budget the same. Until they repay the entire debt in full, there would be a loss to the consumer as they have to pay interest on the entire outstanding amount until that amount is fully paid. Further, they have to bear late penalty charges when the minimum amount due is also not paid by the credit card holder by the due date of the card, which is again higher charges.

Hence, one should carefully utilize the credit limit according to their credit status and repay the amount on a timely basis or at least try to pay the minimum amount due from them, avoiding paying charges but not interest.