Credit Card Interest Calculator
If you don’t pay off your credit card balance each month, you’re paying more than you should in interest. But how much? Enter your credit card balance, your interest rate, and an average monthly payment OR a time period to see how much interest you’d actually pay based on your monthly payment or in a specific period of time.
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When used responsibly credit cards can be incredibly valuable tools. If you're only paying your minimum monthly balance though, interest charges can quickly get out of control.
This can especially be true if you have a rewards credit card. It's easy to overlook interest charges when you're racking up miles, points, or cash back each month; however, if you aren't heavily paying down your balance, interest charges can quickly offset any rewards you might earn.
The most obvious way to avoid paying interest charges is to pay off your credit card bill in full each month, but we get that this isn't always a realistic option. Even paying more than the minimum balance due can be difficult sometimes.
If you are able though, do your best to pay your statement in full each month, or at least pay off as much of your balance as you can. And to be proactive, it's best to not charge more to your card each month than you know you can afford to pay off when your statement rolls around. But again, we get this isn't always feasible, and sometimes, things happen.
One motivating factor to pay your balance off is to actually see how much extra you're paying each month in interest charges. The CardRatings credit card interest calculator is an easy way to do this.
How to calculate credit card interest
Banks use a couple of different methods to calculate interest; generally, either a Daily Periodic Rate or a Monthly Periodic Rate. You can check your cardholder agreement or a statement to understand which your bank uses.
How to calculate interest based on a monthly periodic rate method
- Locate your balance and current APR on your credit card statement. For example, let's say your balance is $1,000 and your APR is 16.99%
- Divide your APR by 12 (for the 12 months of the year): 16.99% / 12 = about 1.42%
- Multiply that number by your current balance. Remember, to multiply percentages, you have to move the decimal two places to the left. For this example that means multiply $1,000 (your balance) by .0142 to get $14.20 interest for that month
How to calculate interest based on a daily periodic rate method
- Locate your balance, current APR and number of days in your billing cycle on your credit card statement. Again, let's stick with a balance of $1,000 and an APR of 16.99. Let's say your billing cycle was 30 days.
- Divide your APR by 365 (for the 365 days of the year): 16.99% / 365 = about .0465% for your daily APR
- Multiply your daily APR (.0465%) by your balance ($1,000) to find your daily periodic rate. In this case, $1,000 x .000465 (we moved that decimal point because it's a percentage) = $0.47 for your daily periodic rate.
- To find the interest due, multiply your daily periodic rate by the number of days in your billing cycle; therefore, 30 days x $0.47 = $14.10 in interest.
The methods above are intended to give you a general idea of the process. Keep in mind, however, that the daily balance example assumes your balance doesn't change at all throughout the billing cycle; you've made no new purchases nor any payments. Credit card issuers could use a daily average balance calculation, which means they average your balance out over your billing cycle to find your interest due. Or, they could use a daily balance method that individually considers your balance on each day of your cycle to find the amount of interest due, in which case, making a payment toward your balance at the beginning of a billing cycle could actually save your money.
How do you avoid interest charges on credit card?
As we mentioned above, the best way to avoid paying credit card interest is to avoid carrying a balance altogether, but again, we get this isn't always possible.
If you can't pay off your balance in full, do be sure to try and pay it down as much as you can, and if that's still not feasible, consider transferring your balance to a balance transfer credit card with a 0% intro APR period to give yourself some more time.
The Citi® Double Cash Card - 18 month BT offer, for example, offers 0% intro APR on balance transfers for 18 months. Eighteen months is a solid period of time to pay down a balance while saving yourself some money on interest charges. Just be aware though that once the intro period expires, standard 15.49% - 25.49% (Variable) APR applies, so it's important to pay off your balance in full within the intro time frame to avoid paying any interest once it expires. Citi is a CardRatings advertiser.
This card also earns up to 2% cash back – unlimited 1% cash back when you buy, plus an additional 1% as you pay for those purchases. To earn cash back, just pay at least the minimum due on time.
Keep in mind though that these new purchases will accrue interest if you're not paying them off in full each month, so if your primary purpose is to avoid paying interest fees, and you can't pay off your balance in full each month, it might be best to just use this card for its intro 0% balance transfer APR offer until you can get your finances under control.
It's also important to note that there is a balance transfer fee: Intro fee 3% of each transfer ($5 min) completed within the first 4 months of account opening. After that, 5% of each transfer ($5 min). This is to be expected with balance transfer credit cards though.
If you're worried about running up new interest charges with your purchases, Citi also offers another option which might make more sense for you: the Citi® Diamond Preferred® Card.
With this card you can enjoy 0% intro APR on balance transfers for 21 months from the date of first transfer (transfers must be completed within four months of account opening), as well as 0% intro APR on new purchases for 12 months from the date of account opening. After the promotional periods expire, regular 15.24% - 25.24% Variable APR will apply. Additionally, remember a balance transfer fee applies with this offer. This, though, is an expected and standard fee among balance transfer cards.
Be sure to explore all of our balance transfer credit cards for more options.
When figuring out how to minimize the amount of interest you're paying, just remember, the minimum payment on your credit card statement is designed to meet the credit card company's goal of maximizing the amount of interest they earn. By using this calculator and visualizing how much money you can save, you're one step closer to meeting your goal of getting out from under the shadow of credit card debt.
How we calculate savings: Our algorithm factors in the introductory balance transfer rate, length of the introductory period, balance transfer fee, ongoing interest rate, annual fee and data entered into the filter in order calculate savings and the time needed to pay off a balance. The algorithm is designed to yield reasonably accurate results.