How to Calculate Monthly Interest on Credit Card Debt

How much do you spend on credit card interest every month?

Being aware of just how much you pay out in credit card interest each month can become a strong impetus for paying off those credit cards. When you see just how much goes to cover the interest on your revolving debts, it's often both shocking and motivating. Here's an easy way to calculate the monthly interest paid on credit card debt.

Step 1

To begin, you need to look at your credit card statement and determine what your annual interest percentage rate is for your credit card account. This percent is often abbreviated as APR. Credit card interest rates usually range from 4.9% to 29.9% depending upon the borrowers credit and the state laws where you live.

Step 2

Next, take the annual percentage rate of interest (APR) and convert it to a decimal amount. This sounds difficult, but it's really pretty straightforward. You usually just need to add a decimal point, and a zero in the case of lower interest rates, to the percentage number either one or two places to the left. Here are some examples:

4.9% interest = .049 when expressed in decimal form (A zero was added as a placeholder for the tens place in this example).

9.9% interest = .099 when expressed in decimal form (A zero was added as a placeholder for the tens place in this example).

12.9% interest = .129 when expressed in decimal form (No zero was needed, the decimal was simply moved two places to the left).

22.75% interest = .2275 when expressed in decimal form (No zero was needed, the decimal was simply moved two places to the left).

29.0% interest = .29 when expressed in decimal form (No zero was needed, the decimal was simply moved two places to the left).

Step 3

Then, the next step is to take the decimal form of your current credit card interest rate (12.9% = .129) and divide it by the number of months in a year, which is 12. Here are some examples:

4.9% = .049 divided by 12 = 0.004083 (number rounded to the sixth place)

9.9% = .099 divided by 12 = 0.00825

12.9% = .129 divided by 12 = 0.01075

22.75% = .2275 divided by 12 = 0.018958 (number rounded to the sixth place)

29% = .29 divided by 12 = 0.024166 (number rounded to the sixth place)

Step 4

Finally, to calculate the dollar amount of monthly interest paid on a credit card balance, multiply the decimal value you calculated in step three with the dollar balance of your credit card debt. Here are a few examples:

These examples all assume a credit card balance of $5000.00.

4.9% = .049 divided by 12 = 0.004083 x $5000 = $20.41 in interest per month

9.9% = .099 divided by 12 = 0.00825 x $5000 = $41.25 in interest per month

12.9% = .129 divided by 12 = 0.01075 x $5000 = $53.75 in interest per month

22.75% = .2275 divided by 12 = 0.018958 x $5000 = $94.79 in interest per month

29% = .29 divided by 12 = 0.024166 x $5000 = $120.83 in interest per month

Tip

It's important to remember that these calculations are approximate and do not account for the effects of rounding or the compounding of credit card interest on a daily basis. However, they do give you a pretty accurate estimate of just how much in interest you are paying each month when you carry a credit card balance.

Things You'll Need

  • Credit Card Statement

  • Calculator