How to Calculate Monthly Interest on Credit Card Using APR

Some people just accept the amounts printed on their monthly credit card statements as being correct. However, you should learn to do the math to verify you are being charged the right amount of interest. Once you understand how to calculate this amount, you can analyze your credit card statements and make sure you are not paying more than you should be. Just like you check your bill for incorrect charges, you should verify your interest charge at the same time.

Instructions

1. Find your annual percentage rate, known as the APR, listed on your credit card bill. This is typically listed next to the interest charge section of your bill, and some companies list it at the bottom of the bill as well.

2. Take the annual percentage rate and divide that by 12. The result gives you a percentage that is your monthly interest rate.

3. Locate the current balance on your credit card at the start of the billing period for the month. Add in any additional purchases you have made this month, and deduct the amount of any payments you sent that are not showing on your bill as being credited. This is your balance that you must calculate interest charges on.

4. Deduct any amount that is part of a balance transfer which you received a 0 percent interest rate on for a promotional period for making the balance transfer. This does not apply to everyone, but if you have done this, you must subtract it from your total in Step 3.

5. Multiply your total from Step 4 by the monthly interest rate that you calculated in Step 2. This is your monthly interest amount that you owe based on the previous balance on your card, plus new purchases using the card.

Tips & Warnings

• Use a calculator to avoid mathematical errors such as placing the decimal point in the wrong location.

• If your calculation and your credit card company's calculation are different, contact the company to inquire why there is a difference.

Resources

• Read this Article in Spanish