In plain text
I = B × (APR) ÷ (365) × d
How does credit card interest work?
Most credit cards charge interest on any balance you do not pay in full by the due date. The charge is set by the APR on your account, and the issuer turns that rate into a daily rate. Each day, a little interest is added to the balance, and it builds on itself if the balance is not paid.
How do I use it?
Find the APR and the balance on your statement. Enter the average balance you carried during the billing cycle, the rate, and the number of days in the cycle. The results show the interest for the cycle, the interest that builds up each day, and the daily rate the calculator used.
How does the calculation work?
The daily rate is the APR divided by the days in a year. The interest that builds up each day is the average balance multiplied by the daily rate. The interest for the billing cycle is that daily interest multiplied by the days in the cycle.
The method is a simple daily calculation, so the result is an estimate of the charge for a cycle.
Why does the daily rate matter?
Card interest looks small on any single day, but it is charged every day you carry a balance. A higher balance or a higher rate raises the interest for each day, and a longer billing cycle adds more days of interest. Seeing the daily amount helps you judge how quickly a balance grows while it sits unpaid.
What can the result not tell me?
Card issuers calculate interest using the average daily balance, the payments made during the cycle, and the grace period on your account. This calculator uses an average balance and does not model payments, new purchases, or fees. It also does not show penalty rates or promotional rates that apply for a set time.
Your statement shows the exact interest charged. Use this calculator to understand the cost, and use the statement for the final figure.
How does a grace period change the cost?
A grace period is the time between the end of a billing cycle and the due date when new purchases may avoid interest. Paying the full statement balance by the due date usually means no interest on purchases. A carried balance removes the grace period, so interest applies to new purchases as well.
The calculator assumes interest applies to the whole average balance, which is the case when you carry a balance from a cycle to the next.
How can I reduce the interest I pay?
Paying more than the minimum lowers the balance that interest is charged on, which lowers the daily amount. Paying the full statement balance each month avoids interest on purchases where the grace period applies. A lower rate, such as an offer from a balance transfer, can also reduce the cost, but read the terms for fees and for when the promotional rate ends.
