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(image: http://www.imageafter.com/image.php?image=b17eva255.jpg&dl=1)Interest Calculator for Credit Cards
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Interest Calculator for Credit Cards
Use your credit card balance and interest rate to determine how much your interest charges will be for a month.
Written by Paul Soucy Lead Assigning Editor Credit cards, credit scoring, personal finance Paul Soucy has led the Credit Cards content team at NerdWallet since 2015. He was an editor with USA Today, The Des Moines Register and the Meredith/Better Homes and Gardens family of magazines for more than 20 years. He also developed a highly successful freelance editing and writing business with a focus on personal and business finances. He was editor of the USA Today Weekly International Edition for six years, and was awarded the top honor from ACES: The Society for Editing. He holds a bachelor's degree in journalism as well as a master of Business Administration. The family lives in Des Moines, Iowa, with his fiancee, his two sons, and an animal named Sam.
Updated January 25, 2023 10:20AM PST
Written by Kenley Young Credit scores, credit cards Kenley Young directs daily coverage of credit cards on NerdWallet. Previously, he was an editor of the homepage and digital content producer for Fox Sports, and before being a front-page editor at Yahoo. He has a wealth of experience in both digital and print media, including stints as an editor at the copy desk and wire editor as well as an editor of the metro for McClatchy. McClatchy newspaper chain.
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Credit card interest is a regular part of the lives of tens of millions of cardholders However, to many, it's unclear exactly how credit card interest is calculated and what the interest rate that is charged to their card account translates into the finance charge which appears on their monthly statement. NerdWallet's credit card interest calculator can calculate the math for you.
Start entering numbers, or read below for tips on how to obtain the most precise result.
What is the basis for the credit card interest calculation
The amount of interest charged on a credit card is determined by a variety of factors:
Grace period
Let's start with the grace period: If you pay all of your bill on credit cards on the due date every month, you will never need to pay interest on your purchases. Period. You don't need a credit card interest calculator because there's nothing to calculate. The rate of interest .
If you roll debt over from one account to the next, then the interest rate will be applicable.
>> > LEARN MORE:
Average daily balance
If the credit card bill is sent in the mail (or is posted online) it will show the total amount of your amount as of the day that ended the billing period. But this isn't the number used in calculating the interest charged. The most important number is the amount you have spent on your daily account throughout the billing period. The card issuer takes the amount of your account's balance for each day in that period and adds it together, then divides them into the total number of calendar days within the time period.
As an example, let's say you had a 30 day statement cycle, and you started with a balance of $100:
If you didn't make any charges or payments during the whole cycle, the average daily balance would be $100.
If you had a charge of $45 post on the 11th day of the cycle, and there was no other event, your average daily balance would be $130. (Ten days at $100, then the following 20 days would be $145.)
If you had a charge of $45 at the end of day 11 of the cycle and a $60 payment on the 21st, your daily average amount would have been $110. (That's 10 days at $100, followed by 10 days at $145, and finally the 10th day at $85.)
Of course, tracking the balance of your account daily is easy when you only make one purchase and only one payment each month. However, if you make frequent use of your credit card regularly through the entire month, the task becomes more challenging -- and calculating the average daily balance over the entire cycle is a nightmare. We've created an application that lets you enter the amount of your purchases and your payments over the course of a month to determine your average daily balance:
Click HERE TO OPEN OUR AVERAGE DAYLY BALANCE TOOL
NerdWallet's credit card interest calculator asks you to enter the balance of your account. Averaging your daily balance will give the most accurate results. To approximate the amount that you can refer to the balance at the close on your statement or estimate what your balance is on a typical day.
>> LEARN MORE:
Interest rate
The interest rate applicable to purchases on your account will appear on your monthly statement. Rates of interest are listed in the form of an annual percentage rate (also known as APR). While the rate stated is an annual rate, credit cards typically charge interest on an ongoing basis. The rate charged on a daily basis is typically 1/365th of your annual cost. If your APR is, say, 18.99%, the daily rate would be about 0.052% that is 1/365th of 18.99%.
Credit card interest typically is compounded each day. The interest paid for day 1 of the period is incorporated into the calculation for day 2. The interest accrued on Day 2 gets added into the calculation for day 3, and so on.
Your each month usually includes all the interest that has been accrued, as well as any other fees you have incurred as well as a small amount of the principal balance.
Nerdy Tip
A lot of credit cards have different rates for different balances. The purchase APR applies to things you buy with the card, while different APRs are applied to cash advances and balance transfers. If this is the case the issuer of the card calculates separate average daily balances for transfers, purchases and advances, and then applies the designated APRs to each.
>> > LEARN MORE:
Days of the cycle
Each credit card cycle encompasses about one month of time, but the billing cycles don't align precisely with calendar months. They usually begin in one month , and then end in the next. Your billing cycle closes at or close to the same date each month. The number of days in the billing cycle is variable from 28 to 31 days. There are several reasons to this:
Different months have different amounts of days.
Certain issuers may not allow statements to close on weekends or holidays.
Federal regulations require you to have your date of due fall on the same day of each month . You must also are allowed at least 21 calendar days between the date your statement is due and the due date.
Our credit card interest calculator lets you choose a number of days from 28 to 31. If you're not certain that you're in the right place, 30 days are an acceptable default. Or you can use to choose the days of the calendar month that the cycle began. (For example, if the cycle started in April but was completed in May choose 30 because April has the same number of days.)
What's next?
Appendix: How math is used in our examples
The maths behind it The cycle is 30 days long, with a starting the balance at $100.
There are no purchases or payment (30 days at $100)
30 x $100 = $3,000
Split by the number of days in cycle The result is $3,000 / 30 = $100
$45 purchase on day 11 (10 10 days for $100 ) and 20 days at $145)
(10 x $100) + (20 ) x $145) = $1,900 + $2,900 = $3,900
Split by the number of days of cycle: $3,900/30 = $130
$45 purchase on day 11 and $60 on day 21 (10 days at $100, $10 days of $145, then $10 days of $85)
(10 100) plus (10 145) + (10 $85) = $1,450 + $1,000 and $850 is $3300.
Split by the number of days in the cycle: $3,300 / 30 = $110
The author's bio: Paul Soucy is the principal credit card editor for NerdWallet. He has worked at USA Today and the Des Moines Register and holds an MBA.
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