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While credit cards can be a helpful financial tool, they need to be used responsibly. That's because when you don't pay your credit card balance in full, the card issuer charges interest. This fee is the cost you pay for borrowing money and carrying a balance.
Unfortunately, high credit card interest can make it hard to pay off a balance. And only making the minimum credit card payments can put a lot of people deeper in debt.
If you're struggling with credit card debt, we recommend using a credit card interest calculator. Our credit card interest calculator can show you how much interest you may pay over time and how different amounts can help with paying off debt faster. Keep reading to learn more.
To use our credit card interest calculator, you'll need to have some important financial figures on hand. You'll need to know the total balance you owe, the annual percentage rate (APR) of your card, and the amount you plan to pay each month. Our calculator will then work out the estimated payoff date and estimate how much total interest you will pay. With this information, a credit card interest calculator can help you develop a debt payoff plan. Just remember that while our calculator can serve as a guide, you must follow your debt payoff plan to be successful.
You may be wondering how credit card interest is calculated. Your issuer will either calculate interest daily or monthly; this is outlined in your credit card terms, but many card issuers calculate interest daily.
For cards that use a daily balance, you'll need to divide your APR by 365 days. For example, an APR of 16.15% would have a daily percentage rate of 0.000442.
Next, you'll need to calculate your average daily balance. You can do this by checking to see how many days your billing cycle is and then figuring out the exact daily balance for all of those days. Add up the balance for each date of your billing cycle. Then, divide it by 25 to get the average daily balance.
For simplicity, let's say your billing cycle is 25 days, and your average daily balance is $2,920. To calculate your interest charges, take the average daily balance and multiply it by the daily rate. Then divide that amount by the number of days in your billing cycle. For our example, $2,920 x 0.000442 = 1.29 x 25 = $32.25 in interest.
To quickly figure out how much interest you'll pay over time, use our credit card interest calculator.
To pay off your credit card debt, you'll need to put more money toward your credit card payments. Making just the minimum payment will only get you so far and will result in more interest charges. Look at your budget and try to free up some funds so you can pay more than the minimum balance each month. If you're not able to free up more funds, you may want to explore other options.
Some people who struggle with credit card debt decide to apply for a low interest credit card. Opening one of these cards makes it possible for you to transfer the balance from high interest cards. Many of these low interest cards have an intro 0% interest promotional offers for 15 to 18 months, giving you more time to pay off the debt without additional interest charges. Be aware that balance transfer fees are often charged -- typically 3% to 5% of the total balance transferred. For more information, take a look at our best intro 0% APR credit cards for inspiration.
Consolidating debt with a loan is another option. Look for a debt consolidation loan or personal loan with a lower interest rate than your credit card has. You can use the funds from the loan to pay off your card and then focus on repaying the loan. While the interest rates may be higher than what you can find with a low interest credit card, the nice thing about debt consolidation loans is they typically offer an extended repayment period of 24 to 60 months. This gives you even more time to pay off your debt. Be aware that loan origination fees may be charged, which are typically 1% to 8%.
If you have minimal debt and can pay it off within 15 to 18 months, a balance transfer credit card or intro 0% APR credit card may be best. On the other hand, if you have more significant debt and need more time to pay it off, a personal loan or debt consolidation loan may make more sense.
Follow these tips to lower your credit card interest rate.
You can first try asking your card issuer to lower your APR. If you've been a customer for a long time and haven't missed any payments, they may be more willing to reduce your interest rate.
If this doesn't work, you might consider applying for a low interest credit card. If you have a good credit score, you'll have better luck scoring one of these cards.
Once you have a card like this, you can do a balance transfer. This process allows you to transfer the balance from other high interest cards to a card with a lower interest rate. You can use our credit card interest calculator to determine how much interest you'll pay in full with the new interest rate.
If you're unable to lower your credit card interest rate, another option is to contact your credit card company and negotiate your debt. To pay off the debt, your card issuer may agree to let you make a lump-sum payment in full or work out a monthly payment plan. This option can hurt your credit, as your report will show the debt as settled, not paid in full. For this reason, you should consider this as a last resort.
Use this credit card interest calculator to figure out the total interest that you'll owe and work out a debt repayment plan that allows you to pay off your debt faster. If you need more guidance, take a look at our personal finance resources.
Most card issuers calculate interest daily. To start calculating interest, you'll need to figure out your daily percentage rate. Next, you'll need to figure out your average daily balance. Finally, you'll take your average daily balance and multiply it by the daily interest rate and then multiply that number by the number of days in your billing cycle. Doing this will give you the total interest for that statement cycle.
You can pay off credit card debt by coming up with a debt payoff plan and putting more of your income toward payments. It's worthwhile to speak with your credit card issuer to see if it will reduce your interest rate; some people have luck with this. Another option is to get a low interest credit card and transfer the balance of your debt to your new card. You can then work on your payoff plan while accumulating little to no interest, depending on the terms of your new card. If that doesn't work well, you might consider speaking with your card issuer to negotiate your debt.
You can lower your credit card interest rate in one of two ways. One is to ask your card issuer for a lower rate. In some cases, the card issuer will agree to do this. Another option is to apply for a low interest credit card or a card with an intro 0% APR promotional offer so that you can transfer your credit card debt to your new card and tackle your debt faster.
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