Credit Card Interest Calculator
Calculate your exact credit card interest using the Average Daily Balance (ADB) method. See how paying early saves money and visualize daily compounding.
Credit Card Interest Calculator
Enter your details below to calculate
Quick Scenarios
Calculator Inputs
Average credit card APR is ~24%
Typically 28-31 days
Uncheck if you paid your last statement in full (activates grace period for new purchases).
Est. Interest
For this 30-day cycle
Avg. Daily Balance
Basis for calculation
Daily Rate (DPR)
APR ÷ 365
Daily Balance & Interest
Pro Tip: Paying just 5 days earlier (Day 15) would save roughly $0.68 in interest this cycle. Timing matters as much as the amount!
How to Use Credit Card Interest Calculator
Enter Balance & APR
Input your starting statement balance and your card's Annual Percentage Rate (APR). You can find the APR on your monthly statement.
Set Cycle Details
Confirm your billing cycle length (usually 30 days). If you carried a balance from the previous month, keep the 'Carried Balance' option checked.
Add Transactions
Use the Advanced section to add estimated new purchases and payments. Adjusting the 'Posting Day' lets you see how timing affects interest.
Analyze Savings
Review the Average Daily Balance (ADB) and estimated interest. Check the chart to see how daily accrual adds up over the month.
Key Features
Interactive daily interest chart
Average Daily Balance (ADB) breakdown
Payment timing simulator
Daily Periodic Rate (DPR) analysis
Complete Guide: Understanding Credit Card Interest
Credit card interest is one of the most confusing aspects of personal finance. Unlike a mortgage or car loan where interest is calculated on a simple monthly principal, credit cards use a dynamic formula based on your Average Daily Balance (ADB). This means every single day you carry a balance, interest accrues—and the timing of your payments matters almost as much as the amount.
This guide will demystify how credit card issuers calculate your bill, explain the "Daily Periodic Rate" (DPR), and show you exactly how to use that knowledge to save money.
The Core Formula: How It Works
Most major U.S. credit card issuers (including Chase, Citi, Amex, and Discover) use the Average Daily Balance Method. They don't just look at your balance on the 1st of the month; they track it every day.
Interest = ADB × DPR × Days in Cycle
- ADB: Average Daily Balance (Sum of daily balances ÷ Days in cycle)
- DPR: Daily Periodic Rate (APR ÷ 365)
- Days: Length of billing cycle (usually 28–31 days)
1. Daily Periodic Rate (DPR)
Your APR (Annual Percentage Rate) is the headline number, but it's not the number used in the actual math. Issuers divide your APR by 365 (or sometimes 360) to find the daily rate.
Example: If your APR is 24.99%:0.2499 ÷ 365 = 0.0006846 (or 0.0685% per day).
2. Average Daily Balance (ADB)
This is where most people get lost. To find your ADB, the issuer takes your balance at the end of each day in the billing cycle, adds them all up, and divides by the number of days.
Because of this, a purchase made on Day 1 of your cycle hurts you more than a purchase on Day 28. The Day 1 purchase is part of your balance for 30 days; the Day 28 purchase is only there for 2 days.
The Grace Period Loophole
The "Grace Period" is the holy grail of credit card usage. If you pay your statement balance in full by the payment due date every single month, the issuer typically waives all interest on new purchases.
However, if you leave even $1 unpaid, you lose your grace period. The next month, interest starts accruing on new purchases the moment they post. This is called "trailing interest" or "residual interest," and it can surprise you with a bill even after you think you've paid everything off.
Warning: Cash advances and balance transfers usually have NO grace period. Interest starts ticking the second you take the money out.
Real-World Example: The Cost of Waiting
Let's say you start the month with a $2,000 balance at 24% APR. You plan to make a $500 payment.
- AYou pay on Day 25 (Due Date):
Your balance stays at $2,000 for 24 days. It drops to $1,500 for the last 5 days.
ADB ≈ $1,916.
Interest Charge: ~$38.00 - BYou pay on Day 1 (Early):
Your balance drops to $1,500 immediately. It stays there for all 30 days.
ADB = $1,500.
Interest Charge: ~$29.00
By simply moving your payment date, you saved nearly $10 in one month. Over a year, that strategy alone saves over $100 without paying a penny extra.
Strategies to Lower Your Interest
1. The Snowflake Method
Make multiple small payments throughout the month (e.g., every payday) rather than one lump sum at the end. This keeps your ADB lower for more days.
2. 0% Balance Transfers
If your credit score allows, move high-interest debt to a card with a 0% intro APR period (usually 12–21 months). This stops the bleeding entirely.
3. Request an APR Reduction
Call your issuer and ask. If you have a history of on-time payments, they may lower your rate by 2–5% just to keep you as a customer.
4. Pay High-APR First
If you have multiple cards, use the "Avalanche Method": pay minimums on all, but throw every extra dollar at the card with the highest APR.
FAQ: Common Confusion Points
Why is my interest higher than (Balance × APR ÷ 12)?
The simple "divide by 12" formula assumes your balance is constant every second of the month. In reality, new purchases increase your balance mid-month, raising the Average Daily Balance. Additionally, months have 30 or 31 days (not exactly 1/12th of a year), so daily compounding adds up slightly differently.
Does interest compound daily or monthly?
Most credit cards compound daily. This means yesterday's interest is added to your principal, and today's interest is calculated on that new, slightly higher total. While the effect is small month-to-month, it adds up over years.
How do I get my grace period back?
If you've been carrying a balance, you need to pay your entire statement balance (not just the minimum) by the due date. Some issuers require you to do this for two consecutive billing cycles before the grace period is fully restored.
About the Author
Jurica Šinko
Finance Expert, CPA, MBA with 15+ years in corporate finance and investment management
Connect with JuricaFrequently Asked Questions
How is credit card interest actually calculated?
Most issuers use the Average Daily Balance (ADB) method. They take your balance at the end of each day, sum those daily balances up, and divide by the number of days in the billing cycle. This ADB is then multiplied by your Daily Periodic Rate (DPR) and the number of days to find your interest charge.
What is the Daily Periodic Rate (DPR)?
The DPR is your APR divided by 365 (or sometimes 360). For example, if your APR is 24%, your daily rate is approx. 0.065%. Interest accrues based on this tiny daily percentage applied to your balance every single day.
Does paying early lower my interest?
Yes, absolutely. Because interest is calculated on your Average Daily Balance, making a payment on Day 5 of your cycle reduces your balance for the remaining 25 days, resulting in a lower ADB and less total interest than if you paid on Day 25.
What if I pay my balance in full?
If you pay your entire statement balance by the due date, most cards offer a "grace period" where no interest is charged on new purchases. However, if you leave even a small unpaid amount, you lose this grace period, and interest starts accruing immediately on all new purchases.
Why is my interest higher than I expected?
This often happens due to "trailing interest." If you carried a balance last month, interest accrued every day between your statement closing date and the day your payment posted. That residual interest appears on your next bill, even if you just paid the full balance shown on the statement.
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