How is credit card interest calculated?

Credit cards use daily periodic rate (APR ÷ 365) applied to your daily balance. Interest compounds daily, making it more expensive than simple interest calculations suggest.

What is average daily balance?

Your average daily balance is the sum of your balance each day divided by days in the billing cycle. Most cards use this method to calculate monthly interest charges.

How can I avoid paying credit card interest?

Pay your statement balance in full by the due date to use the grace period. If you carry any balance, you typically lose the grace period on new purchases too.

Why is my interest charge higher than expected?

Credit card interest compounds daily on average daily balance, and grace periods are lost when carrying balances. Minimum payments barely cover interest, explaining slow balance reduction.

What APR is considered high for credit cards?

Average credit card APRs run 16-24%. Below 15% is good, below 10% is excellent (often promotional). APRs above 25% are high, though store cards may exceed 30%.

Does paying more than minimum save on interest?

Absolutely. Paying more than minimum reduces principal faster, decreasing daily interest accrual. Even $25-50 extra per payment significantly reduces total interest and payoff time.

What is the grace period for credit cards?

The grace period (typically 21-25 days) is interest-free time between statement closing and due date. It only applies when you pay the previous balance in full.

How does a balance transfer affect interest?

Balance transfers to 0% APR cards can save significant interest during the promotional period (typically 12-21 months). Watch for transfer fees (usually 3-5%) and plan to pay off before regular APR begins.

Credit Card Interest Calculator

Calculate interest charges on credit card balances

Instant results•No signup•Estimates only

Current Balance

APR

New Monthly Charges

Monthly Payment

Monthly Interest Charge

$92

$3.01/day

Yearly Interest Cost

$1,100

Min Payment

$100

Principal Paid

$58

Next Month Balance

$5,142

Interest as % of Payment

61%

Visualization

Monthly Payment Breakdown

Principal$700(70%)

Interest$300(30%)

Monthly Payment: $1,000

Results are estimates based on current balances and interest rates.

Results are estimates for informational purposes only and do not constitute financial advice. Actual payoff timelines may vary based on interest rate changes, fees, and payment consistency.

How calculations work Full disclaimer

Credit Card Interest Calculator Formula

Daily Rate = \frac{A PR}{365}

Credit card interest is typically calculated using the daily periodic rate (APR divided by 365) applied to the average daily balance. Interest compounds daily, making high APRs especially costly.

How the Credit Card Interest Calculator Works

1Enter your current credit card balance
2Input the card's APR (found on your statement)
3View the daily, monthly, and annual interest charges
4See how balance changes affect interest costs
5Understand the true cost of carrying a balance

Credit Card Interest Calculator Key Terms

APR: Annual Percentage Rate—the yearly interest rate on your credit card, typically 15-25% for standard cards.
Average Daily Balance: The sum of each day's balance divided by billing cycle days, used to calculate interest charges.
Grace Period: Time between statement close and due date (usually 21-25 days) during which no interest accrues if balance is paid in full.
Compound Interest: Interest charged on both principal and accumulated interest, causing balances to grow faster.

Credit Card Interest Calculator Tips

•Paying in full each month avoids all interest—the grace period is free credit
•Once you carry a balance, interest begins immediately on new purchases
•Even 0% balance transfer cards charge interest if not paid by promotional end date
•Making multiple payments per month reduces average daily balance and interest
•High APRs make credit card debt especially expensive to carry

When to Use This Credit Card Interest Calculator

✓Understanding the true cost of credit card debt
✓Motivating yourself to pay off card balances
✓Comparing credit card offers by APR impact
✓Calculating interest charges on carried balances
✓Planning debt payoff priorities

Credit Card Interest Calculator Examples

High-Rate Card

Balance:$5,000APR:24%Payment:$150/mo

Result:$2,140 total interest

At 24% APR with $150 payments, you'll pay $2,140 in interest over 48 months.

Store Credit Card

Balance:$2,000APR:29%Payment:$75/mo

Result:$1,050 total interest

Store cards often have higher rates. This $2,000 balance costs $1,050 in interest.

Balance Transfer

Balance:$8,000APR:0% intro/21%Promo:18 mo

Result:$0 interest if paid in promo

Paying $445/month during 0% promo period avoids all interest charges.

Understanding Credit Card Interest in Depth

Credit card interest rates are among the highest consumer rates—typically 15-25% APR. Understanding how this interest is calculated reveals why carrying balances is so expensive and why payoff should be a priority.

How Credit Card Interest Works

Interest is calculated daily using the daily periodic rate (APR ÷ 365) applied to your balance. On a 20% APR card, you're paying about 0.055% daily—which doesn't sound like much until you realize it compounds every day.

The Grace Period Benefit

If you pay your full statement balance by the due date, you pay zero interest. The grace period (typically 21-25 days) provides free short-term credit. However, once you carry any balance, the grace period usually disappears—new purchases begin accruing interest immediately.

The True Cost Example

A $5,000 balance at 20% APR costs $1,000 per year in interest, or about $83/month. If you're making a $150 minimum payment, only $67 goes to principal. At this rate, payoff takes over 9 years and costs over $4,500 in interest—nearly the original balance again.

Strategies to Reduce Interest

Pay more than the minimum. Make multiple payments per month to lower average daily balance. Request a rate reduction (works surprisingly often for good customers). Use 0% balance transfer offers strategically. And ultimately, eliminate the balance entirely.

Credit Card Interest Calculator FAQs

Browse more tools in Debt Calculators

Related Calculators

Debt Payoff Calculator

Plan your debt-free timeline and payment strategy

Minimum Payment Calculator

See the true cost of making only minimum payments

Debt Snowball Calculator

Pay off debts smallest to largest for quick wins

Marcus Chen

Financial Analysis Specialist

Marcus has over 12 years of experience in quantitative finance and personal financial planning. He specializes in loan analysis, investment modeling, and consumer debt strategies. His methodologies incorporate industry-standard financial mathematics used by major lending institutions.

Content reviewed: January 2026Next review scheduled: 2027

Editorial Standards: All calculations use industry-standard financial formulas. Content is reviewed for mathematical accuracy and updated to reflect current market conditions. This tool provides estimates for informational purposes and does not constitute financial advice.