Credit card interest calculator – MoneySense

How to use the credit card interest calculator?

Here’s what each part of the calculator means:

• Current credit card balance: How much you currently owe on your credit card.
• Interest rate: The annual percentage rate (APR) charged by your credit card, typically 12% to 20%.
• Calculate your interest: You can calculate the amount of interest either by your monthly payment or by a number of months. For the first option, enter the amount of the payment next to “Monthly payment.” Or click the second option and enter the number of months next to “Desired time to pay off balance.”

How is credit card interest calculated?

If you don’t pay off your full balance before the payment due date shown on your credit card statement each month, you’ll pay interest on what you owe. Every credit card has an annual percentage rate (APR), ranging from 12% to around 20% (sometimes even more) for purchases. The APR is an annual rate, but credit card interest is calculated daily and charged monthly.

To find out the daily interest rate, divide the APR by 365 (number of days in a year). For example, for a card with an APR of 20%, the daily rate is 0.0548%. To calculate monthly interest charges, credit card multiply a cardholder’s average daily balance during each billing cycle (a fixed period of 28 to 31 days) by the daily rate.

Let’s say you’re carrying a balance of $1,000 on a card with a 20% APR. At a daily interest rate of 0.0548%, the daily charge will be about $0.55. Multiply that by the number of days in the billing cycle to see your monthly interest. For 30 days, the interest would add up to $16.50.

Note that credit card providers charge higher interest rates for cash advances (borrowing cash from a credit card) and cash-like transactions, with APRs ranging from 23% to 28%. Plus, interest starts accumulating from the date you take out the cash—there’s no grace period, like the one you get when making purchases on your card (typically 21 days from the date your credit card statement is issued). Borrowing cash with a credit card is very expensive, so limit it to emergencies only.

How to avoid paying credit card interest

The best way to avoid paying credit card interest is to repay not just the “minimum payment” shown on your credit card statement, but the full amount you borrowed, on time, every month. Yes, every month. If you can’t, make at least the minimum payment by the due date, to avoid late fees and any dings on your credit history. The minimum payment is either a flat rate (for example, $10) or a percentage of your outstanding balance (typically 3%), whichever is higher. (Note: In Quebec, the credit card minimum payment is 4.5%. As of Aug. 1, 2025, it will be 5%.)

If you don’t make the minimum payment by the due date, you will be charged a late fee ranging from $25 to $40, which will appear on your next statement. If you’re repeatedly late or stop making payments, you also risk harming your credit score, which could make it harder for you to get affordable credit in the future. Your credit card provider may also raise your interest rate. If you’re receiving a promotional interest rate, you may lose it and have to pay the regular APR. Eventually, the card provider could even cancel your credit card and transfer your debt to a debt collection agency.

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How to reduce credit card debt

If you carry a balance, these five strategies can help you pay less interest on credit card debt.