Credit card interest calculator
Want to figure out how much interest you're accruing on your credit card? Our credit card interest calculator can help you calculate how long it’ll take to pay off your balance, total interest owed and your monthly payment amount.
Natasha Macmillan, Business Unit Director - Everyday Banking
What is credit card interest and how does it work?
When you make purchases using a credit card, you’re essentially borrowing money. If you don’t pay your balance in full when your credit card bill arrives, you’ll be charged interest on any unpaid balance at the end of each billing cycle.
Your credit card interest also compounds. In other words, interest owed from a previous billing cycle is added to your principal (the initial amount of money you spent on your credit card), increasing your balance and, consequently, the amount of interest you’ll owe going forward. Typically, credit card interest is expressed as an annual percentage rate but calculated daily — which is why credit card debt can snowball exponentially when you carry a balance.
Credit card interest calculator explained
Our credit card interest calculator helps you manage your credit card debt to see how much interest you’ll owe based on your current balance and how much time you take to pay it off.
To calculate your credit card interest, fill out the following fields:
- Current credit card balance: the amount you currently owe on your credit card
- Interest rate: most credit cards have an interest rate, expressed as annual percentage rate (APR), of 12% to 20%. This rate is divided by 365 days and charged every day you owe a balance until you pay back what is owed in full
- Calculate your interest: Choose how you would like to calculate the interest you’ll owe. If you calculate it by your monthly payment, you’ll see how many months it takes to pay off your balance. When you calculate it by the number of months to pay off your balance, you can see how much you’ll need to budget for your credit card debt in order to become debt free.
Once you’re done, you can then view the interest owed when you make payments in different amounts and frequencies.
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How credit card interest is calculated
To determine how much credit card interest would accumulate over the course of a month, follow these steps.
- Find the daily interest rate.
To do this, take your credit card’s annual interest rate and divide it by 365. For example, if the interest rate is 20%, the daily rate is 20 ÷ 365 = 0.055%.
- Calculate your average daily balance.
Record your credit card daily balance for a single billing cycle (usually 30 or 31 days, depending on the number of days in that month). Then, add them up and divide by the number of days in the same billing cycle.
- Find the daily interest charged.
Multiply the average daily balance (Step 2) by the daily interest rate (Step 1).
- Find the monthly interest charged.
Finally, multiply the daily interest (Step 3) again by the number of days in the billing cycle. This is how much interest you’ll need to pay for that billing cycle.
How to avoid interest charges on your credit card
If you’re new to the world of credit cards, make sure to practise these good habits when using your credit card:
Pay your credit card balance in full each month
If you can, automate your credit card payments so you’ll never miss a payment deadline.
Utilize interest-free payment plans for large purchases
This includes buy now, pay later (BNPL) services. Plan ahead and make sure you budget your monthly payments to prevent missed payments.
Never take a cash advance on your credit card
Cash advances incur interest charges from the day the cash advance is made. Always try to use the credit card directly on purchases.
Tips for minimizing interest on your credit card
If you’re already carrying a balance and want to minimize the interest you pay, here’s what you can do:
Choose a low interest credit card
If you have trouble paying off your credit cards in full each month, it’s best to stick to a low interest credit card rather than seeking out more spending rewards.
Take advantage of balance transfer offers
Some balance transfer credit cards offer promotions where you’ll pay a small balance transfer fee in exchange for low or no interest on your balance for several months. This gives you some breathing room when trying to clear your credit card debt.
Use a lower-interest personal loan to pay off credit card debt
Personal loans may offer lower interest rates than credit cards, and can help you with consolidating your debt.