How credit card interest is calculated
If you don’t pay the full statement balance, the rest carries over and is charged interest at the card’s APR. This calculator uses APR ÷ 12 as the monthly rate: each month the interest is added to the balance, then your payment comes off, until nothing is left.
Most card issuers actually charge interest daily on the average daily balance, so your statement will differ a little. The payoff time and the size of the interest bill come out very close.
Why small payments take so long
Early on, most of a small payment goes to interest and only a little reduces the balance. For a 5,000 balance at 22% APR:
| Monthly payment | Paid off in | Total interest |
|---|---|---|
| 100 | 11 years 5 months | 8,678.06 |
| 200 | 2 years 10 months | 1,749.88 |
| 500 | 1 year | 574.44 |
What a 0% installment fee really costs
Many “0% interest” installment plans charge a one-time fee instead. That fee is interest, and the shorter the plan, the higher the rate it works out to. APR when the fee is spread evenly over the payments:
| Fee | 3 payments | 6 | 12 | 24 |
|---|---|---|---|---|
| 1% | 5.99% | 3.42% | 1.84% | 0.96% |
| 2% | 11.96% | 6.82% | 3.67% | 1.91% |
| 3% | 17.91% | 10.21% | 5.49% | 2.85% |
| 5% | 29.76% | 16.94% | 9.1% | 4.73% |
The APR is the internal rate of return: the monthly rate at which the payments are worth exactly the purchase amount today, times 12. A fee charged with the first payment is paid sooner, so its APR is a little higher.
FAQ
How is the minimum payment set?
It depends on the issuer. A common formula is a small percentage of the balance (often 1–3%) plus that month’s interest and fees, with a fixed floor. Your statement shows the exact amount.
What about a 0% intro APR?
Enter 0 for the APR to see how long a promotional balance takes at your payment. Remember the regular APR applies to whatever is left when the promotion ends.
Is a personal loan cheaper?
Often, if its rate is lower than the card’s. Compare the total interest here with the loan calculator for the same amount and time.