Credit Card Interest Calculator

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Even with careful reading, there are chances that you may miss going through a few credit card-related terms and conditions before signing the contract. However, a few terms may prove difficult enough to decipher, with the ones related to interest charges being one such example. Certain rates like the Annual Percentage Rate (APR) even require you to use complicated algebraic calculations to determine the interest rate.

This is where a credit card interest calculator comes into the picture. It is an automated digital tool that helps you determine how much interest is getting carried in your balance or how much amount you owe if you don’t pay the credit card bills in time. 

To know more about credit card interest calculators and get answers to queries like how credit card interest works and how to calculate the interest through credit card EMI Calculator  in UAE, continue going through the article below.

What is the Credit Card Interest Rate?

The credit card interest rate is the rate at which the interest is charged by the issuer on the money that you borrow using a credit card. It is also denoted by terms like finance charges and is mentioned as the APR. Credit card providers levy different interest rates based on how you use the credit card. The rates can be different for making purchases, repaying loans, making cash advances, and paying monthly instalments.

When is the Credit Card Interest Rate Charged?

You can be charged with a credit card interest rate in any of the following situations –

  • When you repay a small portion of the outstanding amount
  • When you repay the minimum amount due on the card
  • When you do not repay the credit card bill
  • When you withdraw cash from the ATM using your credit card
  • When you make purchases on EMI

Credit Card Interest Calculator?

A credit card interest calculator is a digital tool specially designed to estimate the amount that is applied to the principal and what is the interest levied. It helps you determine how much more you would be paying when you pay your credit card bill late. You can also get to find out how many months you have to pay off the credit card charges.

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How to Calculate Credit Card Interest in UAE?

You can calculate the credit card interest mechanically using the following formula -

Average Daily Balance x Daily Percentage Rate x Billing Cycle

Your Average Daily Balance is calculated in the following manner - Given Balance x Number of days the balance will be carried forward/the number of days in the given month,

With that said, manual calculations can be tedious and prone to inaccuracy. For this reason, using a credit card  calculator is a preferable alternative.

How to Use the Credit Card EMI Calculator?

The interest amount you need to pay is computed on the annual interest rate, balance, and how much amount you need to pay each month and more. With the help of a credit card EMI calculator, you can easily skip the complicated mathematics and estimate the interest payable by simply providing some basic information. 

To use a credit card calculator for calculating the interest, you would be required to enter the following details -

  • The balance that you owe on your credit card
  • Annual payable rate
  • Monthly payment you will make

Besides providing an estimation of interest payable, the credit card calculator also helps in determining

  • The amount of your next payment applied to the principal
  • The amount applied to the interest on your next payment
  • Number of monthly payments till your balance becomes zero
  • The period in which your balance will turn zero

How Does Credit Card Interest Work?

Credit card interest accrues when you carry an outstanding balance on your card. Here are some important points to consider to understand how credit card interest works

  • When you pay less than the overall balance before the credit card statement is due, it means that you would be carrying an outstanding balance. In such a case, interest would be charged on the carried balance.
  • The interest is described as the APR. This APR can be fixed or variable depending on whether it is linked to a prime rate. It’s worth remembering that this rate is annual but compounds daily. Thus, to determine the actual rate levied to the balance daily, divide the APR by 365 days.
  • This rate is levied to the outstanding balance every day. As a result, this drastically increases the interest payable in a short time.
  • A grace period is offered by the banks towards the end of the billing cycle to ensure that you don’t accrue any interest on your balance. Note that the grace period does not apply to cash advances. If you pay your credit card bill in the grace period, you can make full on-time payments to avoid interest.

Tips to Minimise Your Credit Card Interest

To pay less interest on a credit card, you should practise the following -

  • Pay your entire bill every month
  • Use the offered grace period to pay the bill wisely and record your payments
  • Do not spend beyond your credit limit
  • Check the monthly credit card statement thoroughly to ensure you are not being charged any incorrect charges on the card
  • Minimise your expenses so that you can easily pay your bill
  • Do not miss your deadlines and make timely payments
  • Before applying for a credit card, check for high-interest rates

To Recap

A credit card EMI calculator is an online credit card interest estimation tool that can be used to determine the interest you are accruing on the balance every month. Other than providing an estimation of interest payable, the credit card calculator also helps in determining the amount you applied to the principal for the next payment, the amount accrued as interest on your next payment, the number of monthly payments until your balance becomes zero, and the total time required to reduce your balance to zero.

Frequently Asked Questions

Under what conditions do you need to pay credit card interest?

If you don’t pay your entire credit card bill towards the end of the billing cycle, you will be charged interest on the outstanding balance. This interest will be calculated based on the rate mentioned in the card’s terms and will be added to your account. You would need to pay the accrued interest before closing the account.

What are low-interest credit cards?

These credit cards offer an APR that is below the average rate. In these cards, there are no annual or other maintenance charges.

How can you lower your credit card interest rate?

If you use your credit card responsibly and pay off your credit card bill on time, chances are that your bank or lender will lower the interest rate. However, if you plan to carry a balance (not recommended generally), you can connect with your provider and ask for a rate reduction.

How should you avoid accruing credit card interest?

To avoid accruing interest on the credit cards, pay the bills in full and on time. You should also make sure that you are not exceeding your credit card limit when making purchases.

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