How this calculator works
Most card issuers charge interest daily. The daily periodic rate is the APR divided by 365 (or 360). Each day's balance is added up and divided by the days in the cycle to get the average daily balance, and the month's interest is that average × the daily rate × the days. Purchases raise the average from the day they post; a payment lowers it from the day it posts, so paying early in the cycle saves interest.
- Daily periodic rate = APR ÷ 365 (some issuers use 360).
- Average daily balance = the sum of each day's balance ÷ days in the cycle.
- Interest this cycle = average daily balance × daily periodic rate × days in the cycle.
Worked example
With these inputs: balance at the start of the cycle $3,000; purchase apr 24%; days in the billing cycle 30; issuer divides the apr by 365.
The result is interest charged this cycle $59.18, with daily periodic rate 0.06575% and average daily balance $3,000.00. Pay the full statement balance by the due date and most cards charge no interest on purchases at all (the grace period). Interest starts when you carry a balance.
How credit card interest is calculated
The CFPB explains that most issuers charge interest daily: the APR is divided by 365 or 360 to get the daily periodic rate, and the rate is applied to your average daily balance. Your statement shows both the APR and the balance subject to interest, so you can check the charge with this calculator.
Timing matters. With a $3,000 balance, a $1,000 payment on day 1 of the cycle cuts the interest to $39.45, but the same payment on day 30 only brings it to $58.52. A $500 purchase on day 10 and a $1,000 payment on day 15 give an average daily balance of $2,816.67 and $55.56 of interest.
What different APRs cost on the same balance
On $3,000 for 30 days, 18% APR costs $44.38, 22% costs $54.25, 28% costs $69.04 and 30% costs $73.97. The Federal Reserve's G.19 consumer credit release reports the average APR on card accounts that pay interest, which has been above 20% in recent years.
Interest only applies when you carry a balance: pay the full statement balance by the due date and the grace period means no interest on new purchases. To see how long a balance takes to clear, use the credit card payoff calculator; to compare cards, the debt snowball and avalanche calculator or a balance transfer.
Sources
Frequently asked questions
How is credit card interest calculated?
Divide the APR by 365 for the daily periodic rate, multiply by your average daily balance and by the days in the billing cycle. $3,000 at 24% APR for 30 days: $3,000 × 0.0006575 × 30 = $59.18.
How much interest will I pay on $3,000?
At 24% APR, about $59.18 for a 30-day cycle, or $813.45 over a year if the balance stays at $3,000 and interest compounds daily.
What is a daily periodic rate?
The APR divided by 365 (or 360), the rate your issuer charges each day. 24% APR is a daily rate of about 0.06575%.
Does paying early in the billing cycle reduce interest?
Yes, with the average daily balance method. A $1,000 payment on day 1 of a 30-day cycle cuts the interest on a $3,000 balance at 24% from $59.18 to $39.45.
How do I avoid credit card interest?
Pay the full statement balance by the due date each month. Most cards then charge no interest on purchases because of the grace period.