Calculating Your Credit Card Interest to See How Much You’re Really Paying

February 18, 2014

Control credit card interestDo you pay your credit card balances in full each month? If not, you are paying interest on your balance. If you are paying interest, do you know just how much interest you are paying? You should. Simply knowing how much you’re paying will help keep your balance from getting out of control and can help you improve your credit and financial habits, resulting in a higher credit score, decreased debt, improved spending habits, greater savings and more flexibility with your finances when it comes time to seek a Chicago mortgage.

It’s all about knowledge, and the Equifax Personal Finance blog explains how to understand your credit card interest in the recent article, “

How Is Credit Card Interest Calculated?”

There are three numbers that credit card holders must know in order to calculate their total monthly interest:

  • Annual percentage rate (APR): Look at your credit card statement to find your card’s APR; it will be listed clearly. You may have a card with a variable rate, which means your rate may rise or fall throughout the year. Your rate may also increase as a penalty for a late payment
  • Daily periodic interest rate (DPR): This is the amount of interest you pay per day, based on each day’s balance. This will be calculated and provided for you in your rate summary, but it is your APR divided by 360 or 365 (some creditors use 360, some use 365; you can find out which one your creditor uses on your credit card statement).
  • Average daily balance (ADB): This will also be calculated for you on your billing statement, but you can check it to ensure that you are being charged the right amount. Add together the balances for each day of the month and then divide that number by the number of days in your billing cycle (usually 30).

Once you have your DPR and ADB you can calculate your interest. Multiply your ADB by your DPR and then multiply that number by the number of days in the month. If you need help with the math, sites like Bankrate.com have credit card interest calculators to help you plan.

The important thing is to see how much you are spending each month and interest. Do your best to pay as much of your balance each month as possible, if not paying it in full. Since credit card interest compounds, it will be harder and harder for you to get out of debt if you are only paying the minimum.

Get more tips on getting out of debt and learn more about your credit on the

Equifax Finance Blog, where you can also get information on identity theft protection, retirement, savings, taxes, insurance and more.

About The Author

Read All Stories By Mitch Levinson

Mitch Levinson is the author of “Internet Marketing: The Key to Increased New Home Sales” published by BuilderBooks. He is an Internet marketing expert with expertise in search engine optimization, website development, email marketing, social media and CRM consulting services. He is known for creating effective programs that can be tracked through analytics to prove effectiveness and ROI. Mitch is founder and president of MLC New Home Marketing and MLC FlatFee Realty, as well as managing partner of mRELEVANCE, LLC, a Marketing, Communication, Interactive agency with offices in Chicago and Atlanta. He currently leads the Chicago team. A Multi-Million Dollar Sales Producer who earned an MBA in Computer Information Systems and eCommerce, he brings a unique perspective and experience to the field of real estate communications. Mitch combines the two interests in order to help home builders and developers gain a competitive advantage through the Internet and technology. When he isn’t behind a computer, he enjoys participating in sports and coaching his kids’ teams. Mitch resides in Arlington Heights, Ill., a northwest suburb of Chicago, with his family, which includes two rambunctious labs. Visit my Google+ profile.

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