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Daily Interest Rate Formula:
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The daily interest rate is the interest charged on credit card balances calculated on a daily basis. It's derived from the Annual Percentage Rate (APR) and is used to calculate the interest you'll pay on outstanding balances.
The calculator uses the daily interest rate formula:
Where:
Explanation: The formula converts the annual rate to a daily rate by dividing by 365 days. This daily rate is then used to calculate interest charges on your credit card balance each day.
Details: Understanding your daily interest rate helps you calculate how much interest you'll pay on carried balances, make informed decisions about paying off credit card debt, and compare different credit card offers.
Tips: Enter your credit card's APR percentage. The calculator will provide both the daily periodic rate as a percentage and as a decimal for use in further calculations.
Q1: Why divide by 365 instead of 360?
A: Most credit card companies use 365 days for daily interest calculations, though some may use 360. Always check your cardholder agreement for the exact method used.
Q2: How is daily interest applied to my balance?
A: The daily rate is multiplied by your average daily balance to determine the interest charged for that day.
Q3: What's the difference between daily rate and APR?
A: APR is the annual rate, while daily rate is the rate applied each day. The daily rate compounds to equal the APR over a year.
Q4: Can I avoid paying daily interest?
A: Yes, by paying your statement balance in full each month during the grace period, you can avoid paying any interest charges.
Q5: Do all credit cards calculate daily interest the same way?
A: While the basic formula is similar, some cards may use different compounding methods or calculate based on average daily balance versus ending daily balance.