Credit Card Interest Calculator

Credit cards are a double-edged sword. When used correctly, they provide rewards and convenience; however, the moment you carry a balance, they become an "Anti-Wealth Machine." Most credit card interest rates hover between 15% and 25%, which is significantly higher than the average returns of the stock market. This means paying off a credit card is the single best "investment" most people can make. ### How Interest is Actually Calculated Most credit card issuers use the "Average Daily Balance" method: 1. **APR:** This is the nominal annual rate. 2. **Daily Rate:** The APR divided by 365. Interest is calculated every single day on your outstanding balance and then added together at the end of your billing cycle. If you have a $5,000 balance at 18% APR, you are losing approximately $75 per month?占퐋r over $900 per year?占퐅ust on interest. ### The "Minimum Payment" Trap The minimum payment shown on your statement is usually just 1-2% of the principal plus interest. By paying only the minimum, you ensure that you remain a profitable customer for the bank for decades. It is a strategy designed to keep you in debt for as long as possible. ### Strategies to Escape High-Interest Debt - **The Avalanche Method:** Always pay as much as possible toward the card with the highest APR first while maintaining minimums on others. - **Credit Consolidation:** If your credit score is decent, consider a personal loan with a lower interest rate to pay off the cards. - **Stop New Spending:** It is impossible to clear a debt while you are still adding to it. Switch to debit or cash during your "Payoff Phase." Use this calculator to see exactly how much your debt is costing you every single day, and use that knowledge as motivation to hit zero!