JPMorgan Chase Bank, N.A. Calculating interest charges on your own is empowering because it lets you check that your credit card issuer isn’t charging you more than they should. One big challenge with calculating credit card interest is that your credit card balance can change over the course of a month. First, it converts that annual rate into a daily rate. How to calculate the effective interest rate on your credit card? This may sound challenging, especially if math isn’t your strong suit, but you can handle it easily with the help of a calculator or spreadsheet app. Calculate your daily APR in three easy steps: If your current balance is $500 for the entire month and your APR rate is 17.99%, you can find your daily periodic rate by dividing your current APR by 365. To reiterate, the calculation is: (ADPR)(365) = APR. For credit cards, interest is usually expressed as a yearly rate, but credit card companies will use it to calculate the interest charged during your monthly statement period. 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. That means you can help yourself by. And to decide that, they use a calculation called the daily periodic rate. 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. Variable rates may increase or decrease depending on federal rates. You will also need to keep that penalty APR for a certain amount of time before your credit card issuer will even think about lowering your APR back to normal. Your credit card issuer may bump up your APR to a penalty APR if you are more than 60 days late on making the minimum payment due on your account. Interest on a credit card applies to your total balance but what happens when your balance changes? While the apr is the rate used to determine your finance charges, it is not the true effective interest rate. 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. 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. This calculator will tell you how much to pay each month to reach that goal. We don't support this browser version anymore. That sum is your interest charge for the month. The amount you … If your issuer uses a daily balance, divide the APR by 365. 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. Note: Some credit card issuers use 360 instead of 365, according to the CFPB. In fact, it is always higher than the quoted apr. If the APR is compounded monthly, divide it by 12. Credit cards charge interest, known as APR, if you carry a balance past your due date. It appears your web browser is not using JavaScript. This is the daily periodic rate (DPR). You will need to check with your individual card to make sure you’re using the correct number. Set up an automated minimum payment on the first day of your credit card’s monthly billing cycle. Finding Your Daily APR The APR on your credit card is based on the bank’s opinion of your creditworthiness, which is in large part derived from your credit score. The APR is the yearly interest rate charged on a credit card. Here's a 101 on how credit cards and APRs work. DPR is calculated by dividing the APR by 365, which is the number of days in a year. Your credit card issuer will then multiply this number by your daily balance for each day in the billing period. So the best way to save on interest is by never carrying a balance. 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. 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. Use this calculator to see how much a credit card will cost you or how quickly you can pay off your existing cards. 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. If you owe $1,000 for the first 15 days of a month and then you owe $2,000 over the last 15 days of the month (meaning you charges $1,000 halfway through the month) then your average daily balance is $1,500. Credit card payoff calculator. (The requirement was 15-day advance notice before the CARD Act.). We're here to help you manage your money today and tomorrow. Subtract the amount borrowed from the total payment amount to find the loan’s total interest payments. Your interest rate may be expressed on your statement as … You might want to set up payment reminders by text or email so you don’t forget. You might start the month owing a balance of $1,000 but if you spend $20 a few days later, your balance goes up to $1,020. Explore the world and earn premium rewards with Chase Sapphire Reserve® or Chase Sapphire Preferred®. By figuring out the daily periodic rate on your credit cards, you can have a better understanding of how compound interest is affecting how much you're paying back in interest. Emergencies happen though. With fixed rates, your APR is likely to stay the same throughout the time you carry your card unless otherwise stated. The annual interest rate is divided by 12 to arrive at a monthly interest charge. 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. In this case, your daily APR would be approximately 0.0492%. Therefore, you should have been charged $7.45 in interest charges based on your $500 balance. Please adjust the settings in your browser to make sure JavaScript is turned on. Chase's website and/or mobile terms, privacy and security policies don't apply to the site or app you're about to visit. To calculate your credit card’s DPR, you need to divide your credit card’s APR by 365. And that’s where our credit card interest calculator comes in. To calculate your credit card’s DPR, you need to divide your credit card’s APR by 365. How to calculate APR Many variable interest rates start by using an index, such as the U.S. Prime Rate, and then add a margin. Your credit card's Annual Percentage Rate is the interest rate you are charged on any unpaid credit card balances you have every month. It's calculated as a percentage of the amount you have borrowed. Understanding how you're charged interest rate fees on your credit card is the key to knowing how to manage your card debt. Promotional rates include zero-interest or low-interest periods offered as introductory incentives by credit card companies. It’s a good idea to understand how your credit card issuer will calculate interest charges on your credit card. Simply add a card below to get started. To calculate your credit card’s DPR, you need to divide your credit card’s APR by 365. Each advisor has been vetted by Smartasset and is legally bound to act in your best interests. Own a business? Your balance will also go down if you make a payment. Find your APR by contacting your credit card issuer. You’ll need to first convert that annual rate to a daily rate and then figure out the average balance that you owed over the course of a billing cycle. The daily amounts are added up into one lump sum at the end of your billing cycle (i.e. Different credit card issuers may use slightly different formulas, but you can calculate your interest charges as long as you know your credit card’s annual percentage rate (APR). That can guarantee an on-time payment, while also lowering your next month’s interest charges. Please review its terms, privacy and security policies to see how they apply to you. 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. There are a couple of things to note here. * *If you have a card with an introductory APR that changes after some time, this calculator will not be accurate. the end of the month). In this case, your DPR is 0.054795% ($20 / 365). Since months vary in length, credit card issuers use a daily periodic rate, or DPR to calculate the interest charges. You can avoid this credit card interest by paying your monthly balance in full each month. Find the total amount of your current balance on your credit card statement and enter that amount in the first field. How to calculate the APR on your credit card. To begin, you need to look at your credit card statement and determine what your annual interest percentage rate is for your credit card account. This is the average of the daily balances that you owed over that month or billing cycle. Are you wondering just how much it costs you to to carry a credit card balance? Without it, some pages won't work properly. SAFE Act: Chase Mortgage Loan Originators. You'll know which rates are associated with your credit card by checking your card member agreement and monthly credit card statements. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now. 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. Divide your card's annual percentage rate (APR) to get the periodic rate. You don’t use your credit card during the month so your balance stays at $1,000. By multiplying $500 by 0.00049, you'll find your daily periodic rate is $0.25. Read through your credit card agreement. 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