How To Calculate Credit Card Interest Like A Pro

By Aaron Sarentino Reviewed by Nima Vahdat Updated Nov 15, 2023
How To Calculate Credit Card Interest Like A Pro

Understanding how to calculate credit card interest will help you manage your finances and control your debt. 

Credit card interest is a monthly fact of life for tens of millions of credit card holders in America.  And to many of them, it’s a mystery how credit card interest is calculated and charged each month. 

Below, we’ll pull back the curtain so this is no longer a mystery, and so you can easily calculate your credit card interest with ease. 


  • Your credit card’s interest rate, or APR, is the amount charged on the unpaid monthly balance.
  • If you pay your balance monthly, you will not receive interest charges.
  • There are three types of interest: promotional rates, variable rates, and fixed rates.

What is credit card interest?

Have you ever wondered how credit card companies can afford to lend their customers money? 

The way credit works can be confusing to both new and long-term card holders, but the answer is simple: Interest. 

Interest is the amount of money your credit card company charges you when you fail to pay your full balance. Your interest rate depends on multiple factors, including your credit score, the type of card you choose, and your debt-to-income ratio

What types of interest are there?

Anytime your credit card has an unpaid balance, you will pay interest, and the amount is determined and calculated by the card issuer. There are three types of interest:

  • Promotional rates
  • Variable rates 
  • Fixed rates

Promotional rates are introductory periods that generally include zero to low-interest periods. The length of time depends on the card, but they generally last between twelve and twenty-one months. 

Many people take advantage of a card’s promotional 0% interest period, using it to aid in debt consolidation. While this method can be very beneficial, you must pay the entire balance before the introductory offer ends to avoid the interest rate. 

Variable interest rates can decrease or increase depending on fluctuations in the federal rate. Often, variable rates start low, appealing to those seeking a way to reduce their monthly payments, but the rate’s instability can make maintaining a budget challenging since it can change the monthly payment amount. 

Fixed interest rates stay the same unless otherwise noted by the card issuer. They can start higher than variable rates but may actually be lower over time, depending on the amount of fluctuation in the market. 

To determine which type of interest rates are on your credit cards, you can check your monthly statement of the card member agreement.

How credit card interest works

The interest you pay on your credit card is called APR, which stands for the annual percentage rate. This number is the amount the card company will charge you for failing to pay off your balance. 

For example, if you spend $100 on your credit card and only make a $20 payment, you retain an $80 balance. The card company will then charge you interest on that balance, which you will have to repay the following month. 

That means that paying your balance off will no longer cost you $80; it will include the amount of interest you accrued. 

On your monthly credit card statement, you can see a breakdown of your annual APR, but you can break that number down into a monthly or even a daily rate for a more comprehensive understanding of your charges. 

Understanding how much each card is charging will allow you to make a more informed decision on which cards to focus on paying quicker and the amount the credit card companies are charging you daily for your balance. 

Calculating your monthly interest rate

Calculating your monthly interest rate is easy and only takes three steps. 

Locate your APR – On your monthly credit card statement, locate your balance and the current APR.

Divide the rate – Once you know your annual interest rate, divide that number by twelve to calculate your monthly rate.

Multiply the balance – To see how much interest you’re paying, multiply the monthly rate by your current balance. 

For example, if you are carrying a $600 balance on your credit card with a 16.99% APR, you can determine your monthly interest charges by dividing 16.99% by 12. 

Once you have that number, multiply it by the balance, which is $600 in this example, to find your total interest payment each month. The calculations would look like this:

16.99% x 12 = 2.03% – Your monthly interest percentage

$600 x 2.03% = $12.18 – The amount you pay per month in interest on top of your monthly payment. 

You can clearly see how quickly these charges add up, especially if your monthly balance increases. The higher the balance, the higher the interest charges, the more money you owe. 

Calculating your daily interest

Some card companies use daily interest rate calculations. You can determine your daily charges with three steps.

Find your current rate – Locate your current APR rate and balance on your card statement.

Divide – Divide your current APR by 365 to calculate your daily rate.

Multiply – Multiply that number by your balance to see your daily charges.

For example, if your current credit card balance is $600, and you have a 16.99% APR, you can find your daily interest rate by dividing the total APR by 365. You would then multiply that number by your balance, which is $600, to find your daily APR. The calculations would look like this:

16.99%/ 365 = 0.046% – Your daily interest rate

0.046% x $600 = $0.27 – Your daily interest charges

Once you know your daily interest charges, you can easily calculate your monthly amount by multiplying it by the days in the billing cycle, typically thirty. Staying on top of payments will help reduce the amount of compounding interest you pay, saving you money over time.

Final thoughts on knowing how to calculate credit card interest

Knowing how much interest you’re paying daily, monthly, and yearly will help you keep on top of your payments and pay down your balances faster. 

Once you understand how to calculate credit card interest, you can begin making informed decisions on which card balances to pay off first. 

It can also help you avoid opening high-interest accounts, which can save you money and help you on the road to financial freedom. 

At Americor, we understand the importance of managing your finances wisely. 

As America’s trusted source for debt relief solutions, we aim to empower you with financial knowledge that can lead to informed decisions, whether it’s about savings, investments, or managing debt.

If your debt has become unmanageable and you have difficulty making your debt payments each month, then you should consider a free consultation call with one of our certified Debt Consultants, who can provide personalized advice tailored to your specific needs.

By taking proactive steps today, you can put an end to your financial stress and work towards a brighter financial future. 

Remember, there is always hope for debt relief, and our team of experienced professionals are ready to guide you on your journey to regaining control of your finances.

For more information on Americor’s debt relief services, contact us today to see how we can help you eliminate your debts, and get on the fast-track to becoming completely debt-free!


Aaron Sarentino

Aaron oversees executive, administrative and management functions for the firm. Aaron has a Bachelors in Business Administration from Pepperdine University. He is responsible for helping customers at every stage of the debt settlement process and focused on building loyalty to ensure long-term client retention by addressing customer issues. Aaron plays a pivotal role in the upliftment of the Americor team to ensure the best possible customer experience for clients.