How credit card interest is calculated monthly

Updated October 27, 2026

An APR is a yearly rate. The charge you see on a statement is for one billing cycle, and the card agreement says how that cycle is measured. Two common versions get confused with each other. This calculator uses only the first.

The version this calculator uses

Each month, interest equals the balance at the start of the month times the APR divided by 12. The payment is applied after that interest is added. Paying on the 3rd of the month and paying on the 28th are the same event inside this model. There is one charge per debt per month, and new purchases during the month are invisible unless you edit the balance yourself.

Take a card with a $2,400 balance and a 22.99% APR, and assume the balance does not move before the payment.

2,400 × 0.2299 / 12 = $45.98

If you then pay $80, the interest is still $45.98, because it was computed on $2,400. Principal is $80 − $45.98 = $34.02, and the next month starts at $2,365.98. That is the whole monthly step. The how-it-works guide stacks this step across several debts and an extra payment.

Average daily balance, which many cards use instead

A typical purchase APR on a U.S. card is a daily rate times the average daily balance times the number of days in the cycle. One way issuers publish the daily rate is APR divided by 365. On a flat $2,400 for a 30-day cycle:

2,400 × 0.2299 / 365 × 30 = $45.35

That is $0.63 less than this calculator's $45.98 for the same quiet month. A 31-day cycle on the same flat balance would be 2,400 × 0.2299 / 365 × 31 = $46.86, which is $0.88 more than the calculator. The gap is small when the balance sits still, and it moves when money enters or leaves mid-cycle.

Illustration, still at 22.99%, on a 30-day cycle:

Days 1–9: balance $2,400 (9 days).
Day 10: a $180 purchase posts. Days 10–19 sit at $2,580 (10 days).
Day 20: a $300 payment posts. Days 20–30 sit at $2,280 (11 days).

Average daily balance = (2,400 × 9 + 2,580 × 10 + 2,280 × 11) / 30 = $2,416.00. Interest under the daily method is 2,416 × 0.2299 / 365 × 30 = $45.65. The calculator, which only saw a $2,400 starting balance, still says $45.98. It never heard about the purchase or the payment until the next month's starting balance, if you type the new number in.

Issuers also differ on whether they divide by 365 or 360, whether they include the payment's posting day, and how they treat a returned payment. The agreement's "how we calculate interest" section is the version that bills you. This page is the version that builds the payoff plan.

A grace period can make the charge zero

If you pay the statement balance in full by the due date, and you did the same the previous cycle, many purchase APRs do not apply to those new purchases. The interest line is $0 even though the APR printed on the statement is 22.99%. Cash advances and balance transfers often have no grace period. This calculator has no grace period at all. Every open balance is charged balance × APR / 12 every month. If you are paying the statement in full, do not use a payoff plan for that card. The plan assumes the balance revolves.

Residual interest is the reverse case. After you revolve a balance, paying the statement in full can still leave a few days of interest on the next statement, because the average daily balance included days before the payment posted. The calculator will not show that trailing charge. Once you set the balance to zero, interest stops immediately in the model.

What to type into the payoff plan

Use the APR you are actually revolving at, not a promo rate that has already ended and not a penalty APR you are no longer in, unless that is the rate going forward. If the statement lists a purchase APR and a separate cash-advance APR, those are two balances. The calculator has one APR per row, so split them if both are revolving. A 0% promo that lasts 12 more months cannot be entered as 0% for the whole payoff if you will not finish inside the promo. The balance-transfer guide runs that case outside the single-APR loop.

The minimum on the statement is a dollar amount for this month. Card agreements often set the next minimum as a percentage of the new balance plus interest, or a floor such as $35. This calculator keeps whatever dollar minimum you type. If the real minimum will shrink, the plan here pays the balance off faster than the issuer's own schedule, because you keep sending the original dollar amount. If that dollar amount is what you intend to send anyway, type it as the minimum and leave extra at $0. The statement guide shows which line is which.

Not a statement copy. The $2,400 example is invented so the two formulas can be compared. Your cycle length, divisor, and grace rules are whatever the card agreement says. The result is not financial advice.