Below, you will find steps and formulas for calculating both your daily and monthly percentage rates, which are based on your APR, and how they are applied to your balances. Make sure that you are using the correct APR when for your calculations. You can avoid this credit card interest by paying your monthly balance in full each month. Understanding how you're charged interest rate fees on your credit card is the key to knowing how to manage your card debt. To calculate this average you need to write down the balance that you owed at the end of each day of the billing cycle and then average all those numbers. Emergencies happen though. In this case, your DPR is 0.054795% ($20 / 365). Review your agreement or contact your issuer for details. Daily Periodic Rate, DPR = Issuers use this number to represent the number of days in a year. Purchases, balance transfers and cash advances also have different APRs for cards. Then multiply the resulting figure by 365 (days in the year). Are you wondering just how much it costs you to to carry a credit card balance? In fact, it is always higher than the quoted apr. Maybe you move your due date closer to a payday so that you always have plenty of funds in your account. Note: Some credit card issuers use 360 instead of 365, according to the CFPB. The same can be said when it comes to credit card interest. This may sound challenging, especially if math isn’t your strong suit, but you can handle it easily with the help of a calculator or spreadsheet app. While credit card companies give an interest rate, the interest rate does not account for compounding. You will also need to keep that penalty APR for a certain amount of time before your credit card issuer will even think about lowering your APR back to normal. You might start the month owing a balance of $1,000 but if you spend $20 a few days later, your balance goes up to $1,020. That means six months or more of on-time payments with the penalty rate in effect. How to calculate the APR on your credit card. Different credit card issuers may use slightly different formulas, but you can calculate your interest charges as long as you know your credit card’s annual percentage rate (APR). If your issuer uses a daily balance, divide the APR by 365. One big challenge with calculating credit card interest is that your credit card balance can change over the course of a month. For this example of a $1,000 balance at 18% annual interest, the formula will return a monthly interest charge of $15. The APR on your credit card is the annual rate at which your card issuer will charge you interest whenever you carry a balance. Imagine you have a balance of $1,000 on your credit card at the beginning of the month and your APR is 20%. Variable rate credit cards have an interest rate that is tied to an index such as the U.S. prime rate. It is calculated on a daily basis, so your APR must be converted to a daily rate. We're here to help you manage your money today and tomorrow. Steps to calculate credit card interest: Look Up the APR on Your Credit Card: The interest rate (known as APR) you pay on your credit card is part of your monthly bill. Compare our cash back credit cards to find your best option. To determine how much interest you’re paying and how much interest you could save, you’ll need your current credit card balance, annual percentage rate (APR) and the minimum or average monthly payment. Power its potential with one of our business credit cards, like Ink Business Preferred℠, Ink Business Unlimited℠ or Ink Business Cash℠. The higher a credit card’s APR, the more interest you’ll pay. This is the daily periodic rate (DPR). Understanding how your credit card's Annual Percentage Rate (APR) is calculated and applied to your outstanding balances is crucial to maintaining control over the growth of your overall credit card debt. Chase's website and/or mobile terms, privacy and security policies don't apply to the site or app you're about to visit. While many people are familiar with the term APR, many also do not understand exactly how it works. SmartAsset’s free tool matches you with top fiduciary financial advisors in your area in 5 minutes. Maybe you change the due date to the same time as your other bills (like electricity or rent). Own a business? While the APR will be displayed as a percentage, it’s not a new or different interest rate—it’s a measure that can help you understand the cost of … And to decide that, they use a calculation called the daily periodic rate. And unfortunately, that 20% interest can add up fast… But one thing is for sure, we all want to avoid it. And understanding APR is crucial for you to make educated decisions when it comes to your finances. Those rates can still change but your card issuer is required by law to give you plenty of notice before any change. You can contact your card issuer directly to get up-to-date rate information. To calculate your credit card’s DPR, you need to divide your credit card’s APR by 365. You'll know which rates are associated with your credit card by checking your card member agreement and monthly credit card statements. See, wasn’t that easy? A copy of the agreement will also be sent with your monthly statement. Your interest rate may be expressed on your statement as … Using an updated version will help protect your accounts and provide a better experience. The interest rates with a fixed-rate APR will not change with any index. Once you divide the APR, you have the DPR. How to calculate the effective interest rate on your credit card? Your credit card issuer will use your card’s APR to determine how much you pay in interest. Before we look at how to calculate your credit card interest, let’s review what APR is. We don't support this browser version anymore. If you do carry a balance, the amount that you pay in interest will depend on your card’s APR and your total balance. You could also consider changing the due date of your credit card bill. Credit cards charge interest, known as APR, if you carry a balance past your due date. the end of the month). See all our rewards credit cards and choose one that’s right for you. Variable rates may increase or decrease depending on federal rates. This is the number your card issuer will use to calculate interest. Please review its terms, privacy and security policies to see how they apply to you. Enter your credit card's current balance, its annual interest rate, and the amount of time in which you'd like to get the card paid off. This calculator will tell you how much to pay each month to reach that goal. Ask anyone what interest rate is their credit card charging them and they will answer with the apr. 3. Your balance will also go down if you make a payment. [1] X Research source In the second box, enter the APR for that line of credit. The math equation for that is annual percentage rate (APR) ÷ 365 (number of days in the year). 2 Calculating Your Credit Card Interest. To calculate your credit card’s DPR, you need to divide your credit card’s APR by 365. A higher purchase APR (annual percentage rate) means you will owe more in interest if you carry a balance, while a lower purchase APR means you will owe less. If you are carrying a credit card balance, you will be charged APR interest at a rate that is calculated and determined by your credit card issuer. That means you can help yourself by. Most banks use FICO credit scores, which range from 300 (the worst) to … Understanding how the interest rate and APR work can make all the difference in controlling your debt. Find the total amount of your current balance on your credit card statement and enter that amount in the first field. 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