How to use the credit card interest calculator
- Enter your purchase APR and the number of days in the billing cycle, both shown on the statement.
- Choose how to give the balance: type your average daily balance if the statement lists it, or pick the transactions option and enter the starting balance with each purchase or payment and its day of the cycle.
- Optional: enter a fixed monthly payment to see how long the balance takes to pay off with no new purchases.
- Read the interest for the cycle, the daily periodic rate and the average daily balance. Under More options you can switch the daily rate between a 365-day and a 360-day year.
Formula
Daily periodic rate = APR / 365 (or / 360)
Average daily balance = sum of each day's balance / days in the cycle
Interest = average daily balance x daily periodic rate x days in the cycle
Payoff: each cycle, interest = balance x daily rate x cycle days, then the payment is subtracted
A purchase or payment dated day d changes the balance for day d and every later day. Multiplying the average daily balance by the number of days gives the same result as adding up each day's interest, and the calculator does that sum in whole cents so rounding is exact.
Worked examples
A known average balance: $2,400 at 24.99% APR over 30 days. The daily periodic rate is 24.99 / 365 = 0.06847%, so the interest is 2,400 x 0.0006847 x 30 = $49.30. With a 360-day year the rate is a little higher and the interest is $49.98.
From transactions: the balance starts at $2,000. A $300 purchase on day 5, a $500 payment on day 14 and a $150 purchase on day 22 give daily balances of $2,000 for 4 days, $2,300 for 9 days, $1,800 for 8 days and $1,950 for 9 days. The sum is $60,650, so the average daily balance is $2,021.67 and the interest is $41.52.
Payoff: paying $150 a month on $2,400 with no new purchases takes 20 months and costs $539.96 in interest, for $2,939.96 paid. On the $1,950 left at the end of the transactions example it takes 16 months and $342.06.
How issuers charge interest
Most cards state an annual percentage rate and apply it day by day. The statement balance changes with each purchase and payment, so the interest for a cycle reflects how long you carried each amount. A payment early in the cycle cuts the interest, while a large purchase late in the cycle adds little. This tool shows that effect directly in the transactions option.
Some issuers compound the daily interest, adding it to the balance each day, which gives slightly more than the simple method here. Your cardholder agreement describes the method, and the statement shows the balance used.
Grace periods and carrying a balance
Many cards charge no interest on new purchases when the full statement balance is paid by the due date. Once you carry a balance, that grace period may be lost until the balance is paid in full, so interest can apply from the purchase date. Because rules differ by card, this calculator does not model grace periods. Use it for the cycles in which you carry a balance.
Seeing the cost of a fixed payment
The payoff estimate holds the payment constant and assumes no new purchases or fees. If the payment is smaller than the first cycle's interest, the balance would never fall, and the tool says so instead of guessing. For comparing several cards or paying down multiple debts, use the credit card payoff calculator or the debt payoff calculator, and see how much of your income already goes to debt with the debt-to-income ratio calculator.
Assumptions and limits
- The average daily balance method with a simple daily rate of APR / 365 or APR / 360. Daily compounding is not modeled.
- A transaction on day d is included in that day's balance and every later day. Pending, posting and settlement delays are ignored.
- The default APR is an example value, not a current market rate. Use the one on your statement.
- The payoff assumes a constant payment each cycle of the same length, no new purchases, no fees and a fixed APR.
- Grace periods, minimum interest charges, late fees, penalty rates, promotional rates, cash advances and balance transfers are not modeled.
- This is an estimate, not financial advice. Your statement is the source of truth.
Frequently asked questions
How is credit card interest calculated each month?
The issuer divides the APR by 365 to get a daily periodic rate, multiplies it by each day's balance and adds up the days in the billing cycle. Using the average daily balance times the days gives the same total.
What is an average daily balance?
It is the sum of your balance at the end of each day in the cycle, divided by the number of days. A payment or purchase changes the balance from its date forward, so the date matters as well as the amount.
Does paying early in the cycle reduce interest?
Yes. A payment lowers the balance for every day after it, so paying on day 5 saves more interest than paying the same amount on day 25. You can test it by moving a payment's day in the transactions option.
Why does my statement differ by a few cents?
Issuers may compound daily, round each day's interest, use a different cycle length or include fees. This calculator shows the simple method, so a small gap is normal. A large gap suggests a different APR or balance.
What does the daily periodic rate mean?
It is the share of the balance charged as interest for one day. At 24.99% APR it is 0.06847%, so $1,000 carried for one day costs about 68 cents.