How to calculate your credit card interest to figure out exactly how much your unpaid balances will cost you


how to calculate credit card interest

Your interest rate is the amount your credit card charges you to borrow money.
If you pay your credit card balance in full and on time, you generally don’t need to worry much about your interest rate, which is expressed as an annual percentage rate (APR).
However, if you’re carrying an unpaid balance on your credit card, you’re paying a little interest every day, which you’ll see on your monthly bill.
While you’ll want to check with your bank before running your own calculations, many credit card issuers use the average daily balance method of calculating interest.
Visit Business Insider’s homepage for more stories.

When it comes to credit cards, understanding your interest rate and how it works can be the difference between staying out of debt with an excellent credit score and falling behind in your payments and dipping to sub-par credit score ratings.

Your interest rate is the amount your credit card charges you to borrow money. If you pay your credit card balance in full and on time, you generally don’t need to worry much about your interest rate, which is expressed as an annual percentage rate (APR).

But if you’re carrying a balance on your credit card, you’ll notice you owe more over time, and that’s because of the interest rate. Credit cards are notorious for being one of the most expensive types of consumer debt, with an average interest rate of about 17%.

While in most cases you probably don’t need to calculate your credit card card interest rate — your statements should clearly reflect how much interest is owed on any unpaid balance and your APR should be clear on your statement and your bank’s website — you may want to get an idea of how much your balance is costing you on a day-to-day basis.

Here’s a quick cheat sheet to help you when it comes to calculating your own credit card interest rate.

How to calculate credit card interest
1. Pull up your credit card information

Log on to your financial institution’s website or pull out your latest statement (if you haven’t switched to paperless billing yet, get on that!) to find the pertinent information you’ll need to calculate your credit card interest.

You’ll need to find:

your purchase APR
the number of days in your billing cycle
2. Get to know the terms

The way your credit card works boils down to a few different terms, two of which include annual percentage rate (APR) and, more generally, your interest rate.

Read more: I use 25 credit cards to travel more than 6 months a year. Here’s the best advice I can give you to build credit in your 20s.

Although APR stands for annual percentage rate, your credit card company uses this percentage number to determine the interest you’ll be charged each month when you don’t pay your credit card off in full and carry a balance.

Keep in mind that your credit card may have different types of APR, like a:

purchase APR (usually applied to the overall purchases you make with a card),
balance transfer …read more

Source:: Businessinsider – Finance

      

(Visited 5 times, 1 visits today)

Leave a Reply

Your email address will not be published. Required fields are marked *