Credit card interest calculator
Want to calculate credit card interest and see how much your balance is really costing you? Our credit card interest calculator helps you estimate how much interest you’ll pay, how long it will take to pay off your balance, and how different monthly payments affect your total repayment.
FAQ
Is credit card interest calculated daily or monthly?
What is APR on a credit card?
What is the minimum payment on a credit card?
How does interest work on a cash advance?
How does interest work on a balance transfer?
Which credit cards have the lowest interest rate?
Natasha Macmillan, Senior 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 from your card issuer. If you don’t pay your balance in full by the due date, you’ll be charged interest on the unpaid amount. This interest is expressed as an annual percentage rate (APR), which represents the yearly cost of borrowing.
In Canada, most credit cards charge purchase interest rates between roughly 12% and 21%, though some rewards credit cards can be higher and some low-interest credit cards may be lower. Your APR is divided by 365 to determine your daily interest rate.
Credit card interest is calculated daily but charged at the end of each billing cycle. Each day you carry a balance, interest is applied to what you owe. At the end of the billing period, the total interest for that cycle is added to your statement. If you don’t pay the full statement balance by the next due date, that interest becomes part of your balance.
Your credit card interest also compounds. Once interest is added to your balance at the end of the billing cycle, future interest charges are calculated on the new, higher amount. This means you can end up paying interest on interest, which is why carrying a balance for multiple months can cause credit card debt to grow quickly.
How to use the credit card interest calculator
Our credit card interest calculator helps you see how much interest you’ll owe based on your current balance and how long you take to pay it off. By entering your balance, interest rate, and either your monthly payment or desired payoff timeline, you can estimate your total interest costs and monthly repayment amount.
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 (APR): 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, the credit card interest calculator will show the interest owed when you make payments in different amounts and frequencies.
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How to calculate credit card interest with examples
Typically, credit card interest is calculated using the average daily balance method. This means your APR is converted into a daily rate and applied to your balance each day you carry debt. Here’s how to calculate credit card interest step by step:
- 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.
If your balance stayed at $1,000 for the entire 30-day cycle, your average daily balance would be $1,000.
- Find the daily interest charged.
Multiply the average daily balance (Step 2) by the daily interest rate (Step 1). In our example:
$1,000 × 0.000548 = $0.55 per day in interest.
- Find the monthly interest charged.
Finally, multiply the daily interest (Step 3) again by the number of days in the billing cycle:
$0.55 × 30 days = $16.44 in interest for that month.
This $16.44 would be added to your balance at the end of the billing cycle. If you don’t pay the full statement balance by the due date, that interest becomes part of what you owe and future interest will be calculated on the new total.
How to avoid credit card interest charges
If you want to avoid paying credit card interest altogether, the key is understanding when interest is charged and how your billing cycle works. Here are practical ways to prevent interest charges:
Pay your credit card balance in full each month
The simplest way to avoid credit card interest is to pay your full statement balance by the due date. Most credit cards offer an interest-free grace period on purchases, which means you won’t be charged interest if you pay the full balance on time. Carrying even a small portion of your balance past the due date can trigger daily interest charges.
If possible for your personal finances, set up automatic payments for the full statement balance to ensure you never miss a deadline.
Utilize interest-free payment plans for large purchases
Some retailers and credit card issuers offer interest-free instalment plans or buy now, pay later (BNPL) options. These can be useful for managing large purchases, but they still require consistent, on-time payments. Missing a payment or failing to meet the terms can result in interest charges or fees.
Never take a cash advance on your credit card
Cash advances usually come with higher interest rates than regular purchases, and interest starts accumulating immediately since there is no grace period. Even small cash advances can become expensive quickly because of daily interest charges and additional transaction fees.
Tips for minimizing credit card interest
If you’re already carrying a balance and want to minimize the interest you pay, here’s what you can do:
Make payments earlier or more frequently
Because credit card interest is calculated daily, the timing of your payment matters. Making payments earlier in your billing cycle, or splitting your monthly payment into smaller, more frequent payments, can lower your average daily balance and reduce the total interest charged.
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 often come with lower interest rates than credit cards. Using a personal loan for debt consolidation can combine your credit card balances into one payment and reduce how much interest you pay over time.