To figure out credit card interest, take your annual percentage rate, divide it by 365 to get a daily rate, multiply that daily rate by your average daily balance, and then multiply by the number of days in your billing cycle. With average credit card APRs sitting near 19% as of early 2026, even a few hundred dollars carried from month to month produces a charge worth checking. The math is not complicated once you have the three inputs in front of you.
Here is the formula with round numbers:
- APR: 24%
- Daily periodic rate: 24% ÷ 365 = 0.0657% (0.000657)
- Average daily balance: $500
- Billing cycle: 30 days
- Interest charge: 0.000657 × $500 × 30 = $9.86
The rest is knowing where each number comes from and why your result might land a few cents off the figure printed on your statement.
Find Your APR
Federal law requires every credit card statement to show your annual percentage rate. Under the Truth in Lending Act, your issuer must include each periodic rate expressed as an APR, the type of transaction it applies to, and how your balance was calculated.1Office of the Law Revision Counsel. 15 U.S. Code 1637 – Open End Consumer Credit Plans Regulation Z sets the format: the statement labels it “Annual Percentage Rate,” breaks out interest by transaction type, and shows a year-to-date interest total.2Consumer Financial Protection Bureau. 1026.7 Periodic Statement
Your card almost certainly has more than one APR. The summary table on your application materials and your issuer’s website (often called a Schumer Box) lists separate rates for purchases, cash advances, balance transfers, and penalties. For a normal purchase balance, use the purchase APR. If your balance includes a cash advance or a transferred balance, you will need to run the calculation separately for each portion using its own rate.
One detail catches people off guard: most credit card APRs are variable. Your rate is usually the prime rate plus a fixed margin set when you opened the account. When the Federal Reserve moves its benchmark, prime moves with it, and your APR shifts on the next billing cycle. Use the APR printed on your current statement, not an older one.
Calculate Your Average Daily Balance
Issuers do not charge interest on whatever you happen to owe on the last day of the month. They charge against your average daily balance, which reflects what you owed on every day of the cycle. This is the step where most people give up, but it is worth doing at least once so you can see how the timing of purchases and payments moves the number.
Start with the balance on the first day of your billing cycle. Each day, add any new purchases or fees that posted, subtract any payments or credits, and record that day’s ending balance. Say you started a 30-day cycle at $500 and made a $100 purchase on day 10. Your balance sits at $500 for days 1 through 9, then $600 from day 10 forward. If a $200 payment posts on day 20, the balance drops to $400 for days 20 through 30.
Once every day has a balance, add them all together. In this example: ($500 × 9) + ($600 × 10) + ($400 × 11) = $4,500 + $6,000 + $4,400 = $14,900. Divide by the number of days in the cycle: $14,900 ÷ 30 = $496.67. That is your average daily balance. Note how the timing of the $200 payment matters. Paying earlier in the cycle would have lowered this figure and cut the interest charge.
Convert the APR to a Daily Rate
Your APR is annual, but interest accrues daily. Divide the APR by 365 to get the daily periodic rate. A 20% APR becomes 0.0548% per day (0.20 ÷ 365 = 0.000548). Some issuers divide by 360 instead of 365, which produces a slightly higher daily rate and a bit more interest over the year. Your card agreement says which divisor your issuer uses. Most use 365.
Multiply the Three Numbers
Multiply the daily periodic rate by the average daily balance by the number of days in the billing cycle. Using the numbers above, a 20% APR on an average daily balance of $496.67 over 30 days works out to 0.000548 × $496.67 × 30 = $8.17. That figure should sit close to the “Interest Charged” line on your statement.
If your result is off by more than a few cents, one of three things is usually going on: your issuer divides by 360 rather than 365, you miscounted a day when tallying the balance, or daily compounding pushed the actual charge slightly higher than the simple formula predicts.
Why Daily Compounding Makes the Real Number Slightly Higher
The formula above treats interest as simple: rate times balance times days. In practice, most issuers compound daily. Each day’s interest is added to the balance before tomorrow’s interest is calculated, so you pay a little interest on yesterday’s interest. Over one billing cycle the gap is pennies. Over months of carried debt, it is what people mean when they say credit card balances snowball. A $5,000 balance at 22% APR does not just cost $1,100 a year, because each day’s interest inflates the principal that the next day’s charge is calculated against. The simple formula is close enough to verify a statement. For a multi-month projection, use a compounding calculator.
When the Interest Should Be Zero
If you paid last month’s statement in full, your purchases this cycle may not accrue any interest at all. Federal law requires that when a card issuer offers a grace period, the statement must be delivered at least 21 days before the payment due date.3Office of the Law Revision Counsel. 15 U.S. Code 1666b – Timing of Payments Pay the full statement balance by the due date and no interest accrues on purchases. This minimum was set by the CARD Act of 2009.
The grace period only works when you start the cycle with a zero balance or paid the previous statement in full. Once you carry a balance forward, many issuers revoke the grace period on new purchases, and interest starts accruing the day you swipe. Getting it back usually means paying the full balance down to zero. This is why cardholders who carry even a small balance are surprised to see interest on purchases they expected to be free.
Cash Advances, Balance Transfers, and Penalty Rates
A cash advance almost never has a grace period. Interest begins accruing the day of the transaction.4Consumer Financial Protection Bureau. What Is a Grace Period for a Credit Card? The cash advance APR is also almost always higher than the purchase APR, often 25% to 30% when purchases are at 20%. Add the upfront cash advance fee, commonly 3% to 5%, and pulling $500 from an ATM on your credit card can cost $40 or more in the first month. Run the calculation using the cash advance APR and count the days from the transaction date.
Balance transfers usually have their own APR, sometimes at a promotional 0% for a set window. The calculation is the same: use the balance transfer APR, convert to a daily rate, and apply it to the transferred balance over the days in the cycle. When the promotion ends, any remaining balance shifts to the standard balance transfer APR or the purchase APR, depending on the card.
Missing payments changes the rate too. If you fall 60 days past due, your issuer can impose a penalty APR, commonly 29% to 31%. Unlike an ordinary rate change that affects only new transactions, a penalty APR applied after 60 days of delinquency can be applied to your existing balance. If it kicks in, redo the calculation using the higher rate. Under the CARD Act, your issuer must review the account every six months and restore the original rate if your payments come back into line.
Compare Your Result to the Statement
Match your number against the “Interest Charged” line. Your issuer must show the total interest for the period and a year-to-date figure.2Consumer Financial Protection Bureau. 1026.7 Periodic Statement If it does not line up, check the length of the billing cycle (it may be 28 or 31 days rather than 30), the posting date of any payment, and whether a portion of the balance sits under a different APR you did not include.
If the gap does not close, you can dispute the charge. Write to your issuer describing the error. Under the Fair Credit Billing Act, the issuer must acknowledge the dispute within 30 days and resolve it within two billing cycles, and cannot report the disputed amount as delinquent while it investigates.1Office of the Law Revision Counsel. 15 U.S. Code 1637 – Open End Consumer Credit Plans Most differences turn out to be rounding. Miscalculations do happen, and the only cardholders who catch them are the ones who run the numbers.