How credit card interest is charged
Most cards divide the APR by 365 to get a daily periodic rate, apply it to your average daily balance, and charge it for each day of the billing cycle. Because interest is added to the balance each month, an unpaid balance compounds.
Example: a $5,000 balance at 24% APR costs $5,000 × 0.06575% × 30 = $98.63 in a 30-day cycle, about $1,200 over a year.
Avoiding interest
- Pay the statement balance in full by the due date: most cards charge no interest on purchases during the grace period.
- Carrying any balance usually ends the grace period, so new purchases start accruing interest right away.
- A 0% balance transfer can pause interest, but watch the 3% to 5% transfer fee and the rate after the promotion.
See how long it takes to pay off a balance with the credit card payoff calculator, or plan several debts with the debt payoff calculator.
Frequently asked questions
How much interest will I pay on $5,000 at 24%?
About $98.63 for a 30-day month, or roughly $1,200 a year if the balance doesn't change.
Is credit card interest charged daily or monthly?
Calculated daily, using a daily periodic rate, and added to your balance once a month on your statement.
Do I pay interest if I pay in full?
Not on purchases, if you pay the full statement balance by the due date each month. Cash advances usually charge interest from day one.
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