How to Calculate Credit Card Interest

Credit card statements calculate interest for you.
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Credit cards allow you to buy things without shelling out cash. However, you'll have to pay back the money, and if you don't pay it all within a month, expect to pay interest on the balance. To figure your interest charge, you need to know your current annual percentage rate, or APR, and your average daily balance.

Work the Numbers

Most credit cards accrue interest daily. Determine your average daily balance by summing your balance for each day of the period and then dividing by the number of days in the period, normally 30 days. In the next step, divide your APR by 365 to compute your periodic rate. Multiply your average daily balance by the periodic rate, and multiply the result by the number of days in the period. This is your interest charge for the period. For example, if your average daily balance is $2,000 and your APR is 24.9 percent, your monthly interest charge is $40.93: $2,000 x 30 x (0.249 / 365).

Check the Statement

Many credit cards have variable rates, so check your statement each month to see your current APR. Your statement will also tell you how long it will take to pay off your balance if you make only minimum payments. If your interest calculation differs from that on the statement, you can contact the issuer for an explanation.

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