Interest Rate Credit Card Calculator


How Do You Avoid Interest Charges On Credit Card

How to calculate credit card interest

As we mentioned above, the best way to avoid paying credit card interest is to avoid carrying a balance altogether, but again, we get this isn’t always possible.

If you can’t pay off your balance in full, do be sure to try and pay it down as much as you can, and if that’s still not feasible, consider transferring your balance to a balance transfer credit card with a 0% intro APR period to give yourself some more time.

The CardNamediscontinued, for example, offers 0% intro APR on balance transfers for 18 months. Eighteen months is a solid period of time to pay down a balance while saving yourself some money on interest charges. Just be aware though that once the intro period expires, standard RegAPR APR applies, so it’s important to pay off your balance in full within the intro time frame to avoid paying any interest once it expires. Citi is a CardRatings advertiser.

This card also earns up to 2% cash back unlimited 1% cash back when you buy, plus an additional 1% as you pay for those purchases. To earn cash back, just pay at least the minimum due on time.

Keep in mind though that these new purchases will accrue interest if you’re not paying them off in full each month, so if your primary purpose is to avoid paying interest fees, and you can’t pay off your balance in full each month, it might be best to just use this card for its intro 0% balance transfer APR offer until you can get your finances under control.

How Does Credit Card Interest Work

Credit card interest typically accrues when you carry a balance on a card. Paying less than the entire balance before a statement due date means youâll carry any remaining balance. Interest will accrue on a carried balance. If you pay off your balance in full by the end of the month or billing period, you will not accrue interest on purchases.

Interest is represented by an annual percentage rate or APR. APRs may be fixed or variable depending on whether or not theyâre tied to the prime rate, so the actual rate may change. An APR is annual but interest compounds daily, so to find the actual rate applied to your balance on a daily basis, divide the APR by 365 days. This daily rate is applied to your balance every day the balance remains unpaid, which means your balance will grow exponentially, as every dayâs balance will be higher than the day before.

Usually, card issuers provide a grace period to help you avoid accruing interest. So long as you pay your bill in full before the end of the billing cycle, you wonât accrue interest on your balance. Though grace periods do not apply to cash advances, you can lose a grace period if you carry a balance. Cards typically requires on-time, in-full payments to recover the grace period and be able to avoid interest again.

Paying Off Credit Card Debt

If you can’t afford to pay off your credit card debt all at once but you still want to pay off your balance, what do you do? We’ve established that just making the minimum payment on all your cards isn’t the ideal way to tackle debt. If you’re ready to step up your debt repayment efforts, you can pay off the cards with the highest interest rate first or start with the cards that have the lowest balance. The process of paying down debt is known as amortization. There are different ways of going about it.

One popular strategy called the Snowball Method works like this: You keep up with the minimum payments on all your cards and make extra payments on the card with the lowest balance. By focusing on paying off the card with the lowest balance first, you’ll have the satisfaction of checking debts off your list more quickly. This can be a powerful motivator. Once you’ve paid off your first credit card, you can apply the money you were spending on your first credit card to making payments on your second and so on. You’ll have momentum to continue your debt repayment.

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Types Of Credit Cards

Different types of credit cards suit the needs of different types of spenders. For simplicity, it would be wise to find one that aligns best with the user’s financial intentions for instance, a person who is not an extravagant spender and not interested in anything except getting the best bang for their buck can probably live with just a no-fee cash back card. However, it is very possible for people to carry multiple credit cards for their different advantages, even if it requires a bit of management. What’s important is that they are all paid off in a timely manner.

Cashback: These offer cashback on all purchases, usually 1%, 1.5%, or 2%. Another type may have up to 5% cashback on selected categories of merchandise or services, which normally rotate quarterly.

Rewards: These make up the bulk of most credit cards. The types of rewards usually range between airline miles, hotel bookings, and dining benefits. Credit cards that offer more rewards or miles will generally require annual fees, and it is up to each spender to evaluate their spending habits to decide whether a no- or low-fee card with low rewards is preferable to a high-fee card with high rewards.

Calculate Your Average Daily Balance

Credit Card Interest Calculator

The days used in the pay cycle will get shown on your invoice. Your balance on those days determines the amount of interest you pay.

You begin with your unpaid debt, the quantity from the preceding period. The amount increases when you place an order and decreases when you pay a bill. With each day, go over the pay period, use the transactions details on your statement, and note down each days amount.

After that, sum up all of your daily amounts. Next, divide them by the number of days in the pay period. The end outcome is your everyday average value.

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How Do You Calculate Interest On A Credit Card

To calculate your interest charges, you need to figure out what your APR is, how much your average daily balance is, and how many days are in your billing cycle. You should be able to find most of this information by logging into your account.

  • Divide your APR by 365 to get your daily periodic rate.
  • Multiply that number by your average daily balance. Your average daily balance is your total balance divided by the number of days in your billing cycle.
  • Multiply your daily periodic rate by the number of days in your billing cycle to get your total interest charges for the billing cycle.
  • If youre carrying a credit card balance, youll likely be charged interest. Credit card companies may differ in the time frame they give you to pay for new purchases before they charge interest, though they typically give you about a month to do so.

    The Good And Bad Of Store Credit Cards

    If youve ever been to a department store or chain retailer, the salesperson probably asked you if you wanted to open a store credit card, which is like a normal credit card except that, in most cases, you can only use it at participating stores and businesses. Some of the biggest chain outlets and retailers, such as Target, Home Depot, Walmart, Macys and other clothing retailers offer this option. But how do these cards work? And can they actually help you save money? Lets find out.

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    How To Use This Calculator

    For each credit card you have, enter the current balance, the annual percentage rate and your monthly payment. When you enter the balance and APR, an estimated minimum payment will automatically show up in the third field, but you can change it based on your actual payment amount.

    When you click the Calculate button, youll see several things to help inform your debt payoff strategy, including:

    • The month and year youll be debt-free
    • The number of payments youll need to make
    • Total interest youll pay
    • Total payment amount, including interest and principal

    You can also click on the Payment Schedule tab to see exactly how much of each payment will go toward interest and how much will go toward paying down your balance.

    Remember, you can add multiple credit cards to the calculator. And as you define your strategy for eliminating credit card debt, you can enter different payment amounts to see how much time and money youll save.

    Balances On Your Credit Card

    How to calculate credit card interest rate FAST?
    None $6,000

    You’ll need to add the balances from every day in the 25-day billing cycle and divide by the length of your billing cycle .

    Here’s the math: / 25 = $4,808

    Your average daily balance would be $4,808.

    If you had a balance from the prior billing cycle, you’d include that in the addition part of your balance calculation. And if you made any payments during your current billing cycle, make sure you subtract them when you add up current balances.

    Also Check: Federal Reserve Interest Rate Forecast

    How Do You Calculate Daily Finance Charge

    Basically, your interest payment is calculated by 1) converting your APR to the daily rate. Divide your APR by 365 or 360. Next, determine your average daily balance by writing all of daily balances down. Add them all up, divide by 21 (the usual number of days in the billing cycle. Multiply this number by the daily rate and then by the number of days in the billing period. The interest charge is then rounded up to a percentage of the entire balance to determine the minimum payment.

    About Credit Card Monthly Interest Calculator

    The formula for calculating the Credit Card Monthly Interest calculator is as below:

    Interest = D * A * I * 12 / 365


    • D is the number of days that are counted from the date of purchase.
    • A is the total outstanding amount.
    • I is the interest rate per month.

    After the introduction of plastic money, the lifestyle of people changed, and they started using credit cards especially excessively. Some used to clear the entire debt, while some used to pay the minimum amount due, and some used to pay the partial amount per their finance availability. However, they didnt realize that if the entire amount was not paid, a heavy interest rate was charged, enhancing their debt. There could be multiple reasons for not paying the entire amount, either due to the unavailability of finance or missing the deadline to repay the credit card debt. Because of this, banks earn a large amount of interest on credit card debt since the rate of interest charged is higher than normal personal loans.

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    Why Dont I Just Keep Transferring My Debt Using Balance Transfer Cards

    Whilst balance transfer cards can be a great fix they arent a long-term solution for a number of reasons.

    Firstly, you cant transfer a balance from one provider to a balance transfer card issued by the same provider, so your options are limited.

    Secondly, every time you transfer a balance you will most likely be charged a percentage of your balance as a transfer fee.

    But most crucially, if you fail to clear the debt within the 0% period your balance transfer card will revert to a standard interest rate. If you cant then transfer your balance to another provider you will end up paying a lot for your 0% debt.

    The Credit Card Minimum Payment

    Credit Card Interest Rate Calculator Uk

    When you look at your credit card bill, you’ll see both the full balance and a minimum payment. How do these minimum payments work and what happens if you only make the minimum payments? I’m glad you asked. If you carry a balance on your credit card, your best bet would be to pay it off all at once, as quickly as possible. If you can’t pay it off all at once, it’s a good idea to pay as much as you can afford to pay.

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    How To Calculate Interest Based On A Monthly Periodic Rate Method

  • Locate your balance and current APR on your credit card statement. For example, let’s say your balance is $1,000 and your APR is 16.99%
  • Divide your APR by 12 : 16.99% / 12 = about 1.42%
  • Multiply that number by your current balance. Remember, to multiply percentages, you have to move the decimal two places to the left. For this example that means multiply $1,000 by .0142 to get $14.20 interest for that month
  • Chase Sapphire Preferred Card

    • Regular APR: 18.24% – 25.24% Variable on purchases and balance transfers.
    • Annual fee: $95.

    The Chase Sapphire Preferred® Card has a regular 18.24% – 25.24% Variable interest rate, which isnt bad, especially if you qualify for the lower end of that rate.

    In addition, the Chase Sapphire Preferred® Card boasts a great sign-up bonus: you get 60,000 bonus points after spending $4,000 on purchases in the first three months of opening your account .

    And, if you travel a lot, this is the card for you. Cardholders get 2x points on travel and dining! On top of that, you will also get 25% more redemption value when you book travel through Chase Ultimate Rewards®.

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    How Do You Calculate The Finance Charge On A Credit Card

    How to calculate credit card interest rate?

    Basically, your interest payment is calculated by 1) converting your APR to the daily rate. Divide your APR by 365 or 360. Next, determine your average daily balance by writing all of daily balances down. Add them all up, divide by 21 . Multiply this number by the daily rate and then by the number of days in the billing period.

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    How To Pay Less Interest

    Paying off your balance in full and on time with every monthly statement lets you avoid credit card interest charges on your purchases.

    Many credit cards offer a balance transfer at a lower promotional interest rate. By transferring balances at higher interest rates to another credit card account with a low promotional APR, you can save on interest during the promotional period.

    Many new credit cards offer a low introductory APR on purchases, balance transfers, or both for a promotional period to help you save on interest. After the promotional period ends, your standard interest rate will apply.

    Dealing With High Interest Rates

    • Apply for credit cards with lower interest rates and transfer the balances of the high interest rate cards over. Be sure to read and understand the interest rates for balance transfers, fees, and other terms that may apply.
    • Most credit card issuers calculate interest based on the average daily balance, not the balance at the end of the month. The earlier or more that is paid towards a credit card balance, the lower the average daily balance. This means that although most people usually pay once a month at the end of the month, they can save on interest through multiple payments a month, such as every two weeks or even every week.
    • Apply for loans with relatively low interest rates and use them to pay off credit cards with higher rates. Taking out a line of credit on your home, refinancing your home, or seeking out personal loans are good alternatives. Be sure to understand the fees and costs pertaining to loans. Use our Personal Loan Calculator to estimate the real APR of the loan, which should be at least a few points lower than the credit card interest rate for this strategy to work.
    • Contact credit card companies to try to negotiate lower interest rates or balances. Most of the time, this won’t work until a person has stopped making monthly payments, which is generally not recommended due to its negative impact on other areas of personal finance.

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    How Does Tally Work

    Tally can help you save money immediately on your high-interest credit cards and get you out of debt faster. If you qualify, we give you a credit line with a low interest rate and use it to pay off your cards. We manage all your credit cards for you. All you have to do is make one easy payment to Tally every month.

    Tips For Managing Multiple Credit Cards

    Credit Card Interest Calculator Excel Template
  • Change due datesMany credit card issuers allow a person to change the monthly payment due date. Doing so allows a person to schedule multiple credit cards’ due dates on the same day of each month to minimize the hassle of tracking the due dates of each card.
  • Set up automatic paymentsTaking advantage of automatic payments can help reduce the possibility of missed payments.
  • Eliminate unnecessary credit cardsIt’d probably be a good idea for anyone struggling to manage multiple credit cards to get rid of the cards they rarely use, especially if they carry annual fees. For instance, most people generally don’t need three rewards cards with similar benefits. In addition, spending for each card should be tailored towards their perks for example, a person with a frequent flyer card and a card with no foreign transaction fees can use the former to book a flight but use the latter for actual transactions abroad. Otherwise, all spending can just be placed on one simple card instead.
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