How is the interest rate one of the biggest factors in calculating finance charges of credit cards?

The interest rate, often referred to as the Annual Percentage Rate (APR), is a key determinant in calculating finance charges on credit cards because it directly influences the cost of borrowing. Higher interest rates result in larger finance charges on any outstanding balance, as they determine how much interest accrues over time. Since finance charges are typically calculated based on the average daily balance and the applicable APR, even small changes in the interest rate can significantly impact the total amount owed. Consequently, consumers with credit card debt can see their balances grow rapidly if they carry a high-interest rate.