Credit Card Interest Calculator

On this page you can find a credit card interest calculator. We’ve also included some information about card interest to better assist you.

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How to Calculate Credit Card Interest

To calculate how much credit card interest you’ll pay without using our credit card interest calculator, follow these three simple steps.

Change the Annual to the Daily

The APR, or Annual Percentage Rate, describes how much money you will pay every year. Credit card suppliers are required by law to disclose this rate as it allows consumers to compare. However, they often charge on a periodic basis, such as every day or month.

To calculate this rate, you simply need to divide the APR by 365. For example, let’s assume the rate is 20%. 0.20 ÷ 365 = 0.00054%.

Figure Out Your Daily Balance

The next step is to use the figure above and multiply it with your average daily balance. Assuming that balance is $1,000 and the APR is 20%, that creates a total of $0.54. 

Multiply by Billing Period

If there are 30 days in your billing period, as is often the case, then the next step is to multiply the total ($0.54) by 30, which gives you a total of $16.2.

You also have to factor in compound interest, which is where it gets a little more complicated. Simply put, compounding is when interest is added to your unpaid balance, which basically means you’re paying interest on interest.

How Are Interest Rates Set?

Interest rates can be standard, which means they apply the same for every applicant, or user-specific, which means they will be higher for those with a bad credit score and lower for those with a good one. Generally speaking, the better your credit is, the lower the APR will be.

It’s important, however, that you shop around. Credit card companies are there to make a profit and the higher the rate is, the higher their profit will be. Don’t assume that they are offering you the best rate that you can get and see what their competitors have to offer before you agree to anything. 

Will I Always Pay Credit Card Interest?

Credit card interest is only charged on the balance that you don’t pay. For example, let’s imagine that you have a credit limit of $10,000 and a billing cycle of 30 days. If you spend $5,000 during that cycle and then repay $5,000 at the end, you won’t be charged a cent in interest.

If, however, you leave this amount until the following cycle then you will be charged interest for that billing period. It’s also worth noting that interest rates are different depending on whether you’re withdrawing cash, making a purchase, or initiating a balance transfer. There are also fees and charges that may still be applicable even if you pay off your balance every month.

If you don’t clear your balance every month and instead try to put as much money down as you can, you should consider paying two or three times a month instead. This will reduce your average daily balance, which in turn will reduce the interest that you pay. Instead of repaying $1,500 every 30 days, consider repaying $500 every 10 days.

Are Reward Cards Better?

Generally speaking, reward cards have higher interest rates than standard credit cards. They entice you in with offers of cashback and airmiles, only to trap you with a high APR that can be difficult to escape from. These cards do serve a purpose for consumers who clear their balances every month, but if you’re planning on using that credit over the long-term, you should avoid these cards.

The card that is best for you will depend entirely on your current and future financial situation. If you spend big and clear balances, reward cards are fantastic; if you’re looking to move debt, balance transfer cards are better; if your goal is to accumulate debt, ignore the perks and focus on the lowest APR.

I Paid My Balance, so Why Was I Charged Interest?

This can happen for a few different reasons. It may be that the interest accumulated during a previous month but more often than not it’s because of cash withdrawals. When you withdraw cash from an ATM using a credit card you are charged a fee that can range from 2% to 5%. You are also charged interest on that withdrawal and this interest is often charged from the very first day.

If you were charged a cash withdrawal fee and interest without actually withdrawing any cash, it could be the result of a “cash-like” transaction. These transactions occur just like any other, only your provider registers them as cash withdrawals, which means they charge fees and interest.

The following transactions may be recorded as cash transactions and charged fees and interest:

  • Gambling Transactions: Gambling is becoming more common and widespread in the United States, which means more consumers will be stung by cash withdrawal fees. Any time you purchase casino chips or lottery tickets, it may be recorded as a cash advance. This may even apply to food and drink purchased at a casino.

  • Gift Cards and Money Orders: Credit card providers consider these products as “cash like”, because they can be used to make purchases in place of cash.

  • Foreign Currency: If you can, use cash or debt to purchase foreign currency as you may be stung with additional fees if you use a credit card. The same applies when you purchase traveler’s checks using your credit card.

Credit Card Checks: Many providers send consumers checks they can use to withdraw cash from their credit card. It may be tempting to use these in times of need, but unless you want to be hit with high feeds, you should abstain.