The steps above will put you on the right path to not only learning how to calculate APR on a credit card, it will also assist you in learning how to use your credit card efficiently. By multiplying $500 by 0.00049, you'll find your daily periodic rate is $0.25. If you want to crunch the numbers yourself, first take your APR (Annual Percentage Rate) and divide it by 365 (the days in the year) to get your daily interest rate. Finding the right financial advisor that fits your needs doesn’t have to be hard. You don’t use your credit card during the month so your balance stays at $1,000. Photo credit: ©iStock.com/SIphotography, ©iStock.com/vgajic, ©iStock.com/Pawel Gaul, Bank of America® Travel Rewards Visa® Credit Card Review, Capital One® Quicksilver® Cash Rewards Credit Card Review, 7 Mistakes Everyone Makes When Hiring a Financial Advisor, 20 Questions to Tell If You're Ready to Retire, The Worst Way to Withdraw From Your Retirement Accounts. For your existing credit cards, your issuer's phone number can be found on the card itself. Chase's website and/or mobile terms, privacy and security policies don't apply to the site or app you're about to visit. Then multiply $500 x 0.0149 for an amount of $7.45 each month. SAFE Act: Chase Mortgage Loan Originators. Chase isn’t responsible for (and doesn't provide) any products, services or content at this third-party site or app, except for products and services that explicitly carry the Chase name. SmartAsset’s free tool matches you with top fiduciary financial advisors in your area in 5 minutes. Multiply that DPR by your average daily balance of $1,000 and by the number of days in the month (let’s say 30) and you have your interest charge for the month. This is the daily periodic rate (DPR). You can contact your card issuer directly to get up-to-date rate information. Compare the Top 3 Financial Advisors For You, Remember that you won’t have to pay any interest if you pay your credit card bill in full by its due date. Credit card debt is even listed as the average millennials’ biggest fear. Once you know your DPR and your average daily balance, you can calculate how much you should owe in interest at the end of the month. Before we look at how to calculate your credit card interest, let’s review what APR is. Annual percentage rate, or APR, is a commonly used term associated with loans and credit cards. To calculate your credit card’s DPR, you need to divide your credit card’s APR by 365. Please adjust the settings in your browser to make sure JavaScript is turned on. Understanding how much of your money is going to interest rather than your balance may also motivate you to pay off your debt or help you decide what purchases are worth putting on the credit card. APR is an annual rate but it doesn’t get charged annually. Monthly APR can also help you understand how much it is costing you to carry a balance each month that you are not paying down the entire balance. Have your credit card bill handy. If you are carrying a credit card balance, you will be charged APR interest at a rate that is calculated and determined by your credit card issuer. With this in mind, it is prudent to keep on top of payments each month in order to minimize this effect of daily compounding interest. If you do carry a balance, the amount that you pay in interest will depend on your card’s APR and your total balance. You will need to check with your individual card to make sure you’re using the correct number. You can avoid this credit card interest by paying your monthly balance in full each month. The APR calculation takes into account for the interest rate, how often it's charged, initial fees and any other costs associated with the loan. To calculate this average you need to write down the balance that you owed at the end of each day of the billing cycle and then average all those numbers. Since months vary in length, credit card issuers use a daily periodic rate, or DPR to calculate the interest charges. Calculate your APR (annual percentage rate) for each billing period by adding in all of the finance charges you paid that month, including interest on all balances, balance transfer fees and other transaction fees. In order to calculate the monthly interest charges to your balance you simply need to multiply this daily periodic rate by the number of days in your billing cycle. This percent is often abbreviated as APR. Use this calculator to see how much a credit card will cost you or how quickly you can pay off your existing cards. Steps to calculate credit card interest: Look Up the APR on Your Credit Card: The interest rate (known as APR) you pay on your credit card is part of your monthly bill. Variable rates may increase or decrease depending on federal rates. A higher purchase APR (annual percentage rate) means you will owe more in interest if you carry a balance, while a lower purchase APR means you will owe less. Imagine you have a balance of $1,000 on your credit card at the beginning of the month and your APR is 20%. It appears your web browser is not using JavaScript. See all our rewards credit cards and choose one that’s right for you. Calculating Your Credit Card Interest. Credit card … And unfortunately, that 20% interest can add up fast… But one thing is for sure, we all want to avoid it. Divide your card's annual percentage rate (APR) to get the periodic rate. Your points don’t expire as long as your account is open; however, you’ll immediately lose all your points if your account is closed for program misuse, fraudulent activities, failure to pay, bankruptcy, or other reasons described in the terms of the Rewards Program Agreement. The higher a credit card’s APR, the more interest you’ll pay. Just enter your current balance, APR, issuer and monthly payment to see how long it will take to pay off your balance and how much you’ll pay in interest. DPR is calculated by dividing the APR by 365, which is the number of days in a year. For example, an APR of 14.99% compounded daily would have a periodic rate of (14.99% / 365) = 0.0004 = 0.04%. One big challenge with calculating credit card interest is that your credit card balance can change over the course of a month. How to calculate the effective interest rate on your credit card? Some cards will have a variable APR and others will have a fixed-rate APR. First, it converts that annual rate into a daily rate. Issuers use this number to represent the number of days in a year. While the APR will be displayed as a percentage, it’s not a new or different interest rate—it’s a measure that can help you understand the cost of … How to calculate the APR on your credit card. For this example of a $1,000 balance at 18% annual interest, the formula will return a monthly interest charge of $15. * *If you have a card with an introductory APR that changes after some time, this calculator will not be accurate. Then multiply the resulting figure by 365 (days in the year). Those rates can still change but your card issuer is required by law to give you plenty of notice before any change. 3. Credit card payoff calculator. The same can be said when it comes to credit card interest. Find your APR by contacting your credit card issuer. The result is the APR. And to decide that, they use a calculation called the daily periodic rate. Here’s how to calculate APR for a car loan in four steps: Get the total payment amount by multiplying the monthly payment by the term of the loan in months. Arrive at a monthly interest charge for the month which rates are associated with your credit card.. 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