Credit Card Interest Calculator

Calculate the total interest paid on credit card using the interest calculator below.

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Optionally enter the price per unit
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Total Credit Card Interest:

$1,130.37

Months to Payoff:
18
Total Payments:
$8,630.37
This calculation is based on widely-accepted formulas for educational purposes only - this is not a recommendation for how to handle your finances, and it is not an offer to lend. Consult with a financial professional before making financial decisions.
Learn how we calculated this below


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How to Calculate Credit Card Interest

Credit card interest is calculated the same way that interest is calculated on any type of loan. While there is no formula to calculate the total interest paid, there is a way to calculate what the interest payment will be at each time period. You can use this method to aggregate the total interest paid on the card, assuming no more debt is added to the payment.

What Affects Credit Card Interest

There are several factors that directly impact the amount of credit card interest that will be paid: the loan amount outstanding, the interest rate, the remaining months left to pay the loan off, and the monthly payment.

There are also factors that indirectly affect credit card interest. The interest rate can be affected by the borrower’s credit history, credit score, and the type of credit card.

Some cards also have different rates for different types of balances. For instance, some banks will charge a different rate for a balance transfer than for a purchase.

Some cards also have a lower introductory rate that may increase after a period of time.

Aside from these variations, the method to calculate credit card interest is to use a simple formula.

Credit Card Interest Formula

The credit card interest formula to find the interest for each payment is:

INT = P × r

Where:
INT = interest for payment
P = remaining principal balance
r = periodic interest rate

Thus, the interest portion of a payment is equal to the remaining principal balance multiplied by the periodic interest rate. Generally, the periodic interest rate is equal to the annual interest rate (APR) divided by the number of payment periods (usually 12 for monthly payments).

This is the formula for a specific time period. You can calculate the total credit card interest by iterating through each payment and adding together all of the monthly credit card interest payments.

For example, let’s calculate the total credit card interest for a card with a $2,000 balance and a 20% annual interest rate. Let’s calculate the interest assuming this borrower paid off the balance in 6 months and their payment will be a fixed payment of $353.05 per month.

Let’s input these amounts into the credit card interest formula to solve for the first month’s interest payment. Before we do, we must adjust the interest rate to allow it to work in the formula.

The formula calls for a periodic interest rate, but the 20% interest rate is an annual interest rate. So we must divide it by 12 to arrive at a periodic interest rate of 1.67%.

INT = $2,000 × 1.67%
INT = $33.33

If we now use the credit card interest calculator above, we get total interest of $118.27 and a monthly payment of $353.05. The total payments over the next 6 months will be $2,118.27.

The amortization schedule below shows how this breaks down for the payment, principal, interest, and remaining balance:

Time Period Payment Principal Interest Remaining Balance
1 $353.05 $319.71 $33.33 $1,680.29
2 $353.05 $325.04 $28.00 $1,355.25
3 $353.05 $330.46 $22.59 $1,024.79
4 $353.05 $335.97 $17.08 $688.82
5 $353.05 $341.57 $11.48 $347.26
6 $353.05 $347.26 $5.79 $0.00
Total $2,118.27 $2,000.00 $118.27

You can use our credit card payoff calculator to see how the payoff date will change by increasing or decreasing your monthly payment.

What is a Good Interest Rate?

The average credit card interest rate in the U.S. is approximately 21.4% annually.[1] So, anything close to or better than this interest rate is a good interest rate.

However, if you have great credit, then you would want a card that’s much better than the average rate. If your credit is below average, you should be ok with a credit card rate that is near the average credit card interest rate of 21.4%.

There are still other considerations in a credit card besides its interest rate. For example, some credit card companies charge different types of fees, so a credit card with a low-interest rate, but a lot of fees may be worse than a credit card with a slightly higher interest rate with no fees.

Another consideration is the rewards that a credit card offers. Some may offer cash back or points that can be used for airlines, hotels, or shopping. Either way, know what is most important to you and go with that credit card.

Since there is no collateral attached to credit card debt and because credit card debts have historically had a high default rate, the interest rates on credit cards are the highest of any form of a loan. This is why many financial experts say to pay off the credit card balance in full each month.

How to Reduce Credit Card Interest

Credit card interest can be reduced in a number of ways. All of these require the credit card holder to take some form of action.

The first way to reduce credit card interest is to start paying it off. If you pay the balance down, the interest must decrease.

If you are working on paying it off and have a set monthly payment, the interest can even be reduced further by paying more than was planned. In our example, if you paid $400 per month instead of $353.05, the total interest falls to $106.26.

Another way to reduce interest is to call up your credit card provider and ask for a better rate. This will especially work for those who have excellent credit and no late payments. With a lower interest rate, the interest paid will be less as well.

If your credit card provider won’t lower your interest rate, you can find a different company that may offer a low introductory rate. You can move your balance over to this new card with a low rate and pay it off with less interest.

Make sure that you can pay the balance off before the introductory rate expires, because once it does, the interest rate will increase substantially.

References

  1. Schulz, M., Average Credit Card Interest Rate in America Today, Lendingtree, https://www.lendingtree.com/credit-cards/average-credit-card-interest-rate-in-america/