How to Calculate Credit Card Interest & Payments

Video Transcript

"You have a credit card, but you don't know how much you're paying in your interest. Hi, I'm Carrie Kukuda, the Someday Coach. I'm going to tell you how to calculate your credit card interest and payments. Every credit card company uses a different formula. It may be similar or may be the same, but you don't know. So, you want to look at your user agreement. Your user agreement comes with your, when you apply for your credit card and will give you the indication as to how they formulate your finance charges. If you don't have that information still, which most people don't, you can always contact your credit card company and they can give that information to you. You can also go on-line and calculate, there's a ton of calculators on-line that can calculate those numbers for you. What you'll need is your APR, which is thee interest rate on the finance, that they charge you for your finance charges and you can calculate it through those formulas. An example is your average daily balance. Basically, how that works is they will take the certain amount of days, if it's, say, June, we have thirty days, and they're going to take your balance of every day, they check every certain, they check, excuse me, they check at a certain time every day, and take those balances and add them together and then they're, what they're going to do is take and multiply that by your interest rate. If your interest rate, say, example, is nine percent for the year, you're going to calculate and divide that by three hundred sixty-five days to get that actual number that they would times by those thirty days. So, just a little thought, if it seems a little complicated for you, I would suggest to get a hold of your credit card company and find out what formula they're using so that you can have an idea of how much you're getting charged on your finances. Carrie Kukuda, thank you!"