Transparent method
The formula
Worked example
Example inputs
How to interpret the result
A high APR doesn't just cost more in absolute interest dollars, it slows down how much of any given payment actually reduces the balance, because a larger share of that payment first has to cover the larger monthly interest charge before anything is left to reduce principal.
Before you rely on it
What to check
Compare how much of your actual payment goes to interest versus principal at your specific APR, rather than assuming most of any payment automatically reduces the balance.
The common error
Where people go wrong with credit card interest calculator
Assuming a payment mostly reduces the balance regardless of the card's APR. At a high APR, a larger share of each payment covers interest first, leaving a smaller remaining share to actually pay down principal than most people expect.
Sensitivity evidence
How card APR changes the estimated monthly interest
| Card APR | Estimated monthly interest | Estimated principal reduction |
|---|---|---|
| 18.9% | $79 | $121 |
| 20.9% | $87 | $113 |
| 22.9%worked example | $95 | $105 |
| 24.9% | $104 | $96 |
| 26.9% | $112 | $88 |
Every input, tested
Which input moves the estimated monthly interest most
| Input | Tested from | To | Estimated monthly interest at each end | Swing |
|---|---|---|---|---|
| Average daily balance | $4,500 | $5,500 | $86 to $105 | $19 (20%) |
| Card APR | 20.9% | 24.9% | $87 to $104 | $17 (17%) |
| Payment this month | $180 | $220 | $95 to $95 | none |
Two variables at once
Estimated monthly interest by card APR and average daily balance
| Card APR \ Average daily balance | $4,000 | $5,000 | $6,000 |
|---|---|---|---|
| 18.9% | $63 | $79 | $94 |
| 20.9% | $70 | $87 | $104 |
| 22.9% | $76 | $95 | $115 |
| 24.9% | $83 | $104 | $125 |
| 26.9% | $90 | $112 | $135 |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Average daily balance | $5,000 |
| Card APR | 22.9% |
| Payment this month | $200 |
| Estimated monthly interest | $95 |
| Estimated principal reduction | $105 |
Where the inputs come from
Average daily balance is the mean of your balance across the billing cycle, shown on your statement or estimated from the balance before and after purchases and payments. Card APR is the annual rate, and the monthly interest divides it by 12, though issuers use a daily periodic rate of APR divided by 365. Payment this month is what you plan to pay, to show how much of it reduces the balance rather than covering interest.
When the result stops applying
The estimate uses a simple monthly figure, and actual interest is calculated daily and depends on when purchases post. Cash advances and penalty rates have higher APRs with no grace period. Interest compounds daily on many cards. If you carry a balance, new purchases usually begin accruing interest immediately, with no grace period.
What to compare it with
See the timeline with the credit card payoff calculator, and the minimum payment page for a percentage-based payment. The balance transfer and debt consolidation calculators show lower-rate options. The APY calculator explains how compounding raises the effective cost above the stated APR.
People also ask
Frequently asked questions
How is credit card interest calculated?
Issuers apply a daily rate, the APR divided by 365, to your balance each day and add the total at the end of the cycle, so the balance during the month matters.
What is a grace period?
The time between the statement date and the due date when new purchases do not accrue interest, but only if you paid the previous statement balance in full.
Why is my interest higher than I expected?
Interest compounds daily, new purchases may accrue immediately when you carry a balance, and cash advances or penalty rates can carry higher APRs.