Credit Card Interest Calculator
Calculate how credit card interest affects your balance over time. See the impact of different payment amounts and understand how long it takes to pay off your balance.
Compare Payment Scenarios
Current Payment Plan
Monthly Interest:
$0.00
Time to Pay Off:
0 months
Total Interest Paid:
$0.00
Total Amount Paid:
$0.00
Alternative Payment Plan
Time to Pay Off:
0 months
Total Interest Paid:
$0.00
Interest Saved:
$0.00
Total Amount Paid:
$0.00
Minimum Payment Impact
Minimum Payment:
$0.00
Years at Minimum:
0 years
Total Cost:
$0.00
Understanding Credit Card Interest
Credit card interest, also known as finance charges, can significantly increase the cost of carrying a balance. Understanding how interest is calculated and its impact on your payments is crucial for managing credit card debt effectively.
How Credit Card Interest Works
Interest Calculation
- APR divided by 365 (daily rate)
- Applied to average daily balance
- Compounded daily
- Charged monthly
Grace Period
- 25 days for new purchases
- No interest if paid in full
- Cash advances have no grace period
- Balance transfers vary
Minimum Payments
- Usually 2-3% of balance
- Interest + small principal
- Can take years to pay off
- Very expensive long-term
Cash Advances
- No grace period
- Higher interest rates
- Fees of 3-5%
- Separate from purchase balance
Credit Card Interest Rates
| Card Type | Typical APR Range | Average APR |
|---|---|---|
| Premium Rewards | 15-25% | 20.5% |
| Cash Back | 14-24% | 19.2% |
| Travel | 16-26% | 21.8% |
| Business | 13-23% | 18.1% |
| Store/Retail | 20-28% | 24.3% |
Interest Calculation Methods
How Lenders Calculate Interest
Average Daily Balance
- Most common method
- Sum of daily balances ÷ number of days
- Applied to purchases and cash advances
- Payments reduce balance immediately
Two-Cycle Average
- Less common method
- Average of current and previous month
- Can result in higher interest charges
- Favors the credit card company
Previous Balance
- Simple but rare method
- Interest on balance from previous month
- Payments don't reduce interest until next month
- Generally not used anymore
Adjusted Balance
- Payments and credits subtracted
- Can include new purchases
- Rarely used today
- Generally consumer-friendly
Strategies to Minimize Interest
Payment Timing:
- Pay before due date
- Take advantage of grace period
- Pay more than minimum
- Make payments throughout month
Balance Management:
- Pay high-interest balances first
- Use balance transfers wisely
- Avoid cash advances
- Keep utilization below 30%
Rate Shopping:
- Compare card APRs
- Look for 0% introductory offers
- Consider secured cards for building credit
- Negotiate with current issuer
Debt Reduction:
- Create payoff plan
- Use debt consolidation
- Consider hardship programs
- Seek credit counseling if needed
Key Takeaways for Credit Card Interest
- Credit card interest is calculated daily and can add hundreds or thousands to your balance
- Paying only the minimum can result in decades of payments and exorbitant interest costs
- The grace period only applies to new purchases, not existing balances
- Cash advances and balance transfers often have higher rates and no grace period
- Understanding your card's interest calculation method helps you minimize charges
- Always pay more than the minimum to reduce interest and payoff time
- Consider balance transfers or consolidation for high-interest debt
- Monitor your credit utilization and payment history regularly