This Credit Card Interest Calculator can be used to calculate how much you would end up paying when staying current on your accounts. The interest rate that you put in here, will not effect the figures that are calculated for the consumer credit counseling and debt settlement programs.
Is Your Credit Card Costing You Too Much?
Whether You’re Paying off existing debt or considering using a credit card to finance a major purchase, you may be able to save thousands of dollars by taking a minute to shop around for the best credit card with the lowest interest or an introductory 0% Credit Card!
Use the Calculator above to determine how much money you would save.
Credit Card Interest and Loan Terms You Should Know
Learning the different credit card terms and how credit card interest is calculated can help you on the next step using your credit card in the best possible way.
- Annual Fee – The amount you pay each year for use of the credit card.
- Annual Percentage Rate (APR) – Also known as annual interest rate, it calculates the percentage of interest you will pay on your credit card purchases that aren’t paid in full each month.
- Average Daily Balance – The base amount that is used to calculate your credit card interest charges.
- Balance Owed (Total To Pay)- The outstanding balance you need to pay including interest.
- Interest – The price you pay for borrowing money
- Monthly Payment– The lowest amount you need to pay each month to stay in good standing with your credit cards and loans.
- Loan Amount – The amount of money you borrow
- Loan Term – The amount of time the lender gives you to pay off the loan amount
- Credit Rating – The evaluation of risk lenders and banks look at before they let you borrow money.
How Much Credit Card Interest Will You Pay?
Credit card interest is the amount of money you will be charged if you don’t pay off your credit card balance at the end of each billing cycle. Paying credit card interest can vary depending on how much credit card debt you have and what type of credit cards benefits are offered to you by your credit issuer.
How Does Credit Card Interest Work?
Credit card companies calculate interest based on your daily balance so if you aren’t paying your credit card in will you will be paying interest on purchases and also the interest itself. Credit card interest rates are set annually but you will be charged daily and billed monthly.
What Types Of Credit Cards Benefits Are There?
There are credit cards benefits that you can use to avoid paying credit card interest, while others allow for users to invest in their credit score and improve it over time. Interest on your loan is usually calculated daily by dividing the amount you owe by the number of days in a year, and credit cards on the other hand might charge you monthly.
Types Of Credit Cards
– Personal credit card: this type of credit card is the most common and often comes with benefits such as cash back, rewards or points for using the card. However, if you miss a payment or make late payments then credit cards may increase your credit interest rate which will make it harder to repay your credit card debt.
– Secured credit card: these types of credit cards may come with a higher interest rate than standard credit cards, but they are safer for people who have had trouble repaying their debts in the past since you will need to put money down as collateral if you default on repayment. Secured credit cards are typically offered to someone who has no credit or bad credit.
Related: Best Credit Cards For Bad Credit
Why Did My Credit Card Interest Increase?
There are many reasons why your credit cards interest rate have increased. Some of these reasons are due to mistakes you might have made with your finances and some are from the credit card companies themselves. Here are some reasons of why your credit card interest might go up:
- The promotional period has ended – If you signed up for a credit card that offered 0% interest for 18 months once those first 18 months have ended you will automatically be charged the regular APR you agreed to in the terms and conditions of your credit card.
- The Index Rate Changed – Credit card issuers use benchmark interest rates such as the prime rate with is based on decisions from the Federal Reserve. Most credit cards have a variable interest rate which mans that the interest rate is tied to the interest rates in general. So if the prime rate rises the credit card interest rate will also rise.
- Credit Card Review – Credit card companies will periodically review your finances and make changes to your account if they see fit. For instance, if your credit score has decreased significantly from when you first opened your account they might raise your interest rate. If they do the credit card company is required to give you a 45 days notice of change and the new rate will only apply to new purchases.
- Missed Payments – If you miss a payment the credit card company will send you a penalty likely in the form of fee. If you become 60 days delinquent on your payments, most credit card companies will charge you a higher interest rate. The penalty APR that may apply after 60 days can be as high as 29.99%
👉Learn what happens when you don’t pay your credit card bill on time.
Can I Negotiate Credit Card Interest?
Yes, you can negotiate credit card interest rates if you aren’t happy with your current rates. Here are the steps to take when negotiating your credit card interest:
1. Call Your Credit Card Company For The Credit Card You Have Had The Longest
The reason why you should negotiate interest with the credit card you have owned the longest is because you have a longer relationship with this credit card company and can prove your good history to them. If you have consistency made payments on-time and have a low debt on those cards it gives you a better chance for negotiating.
2. Tell The Credit Card Company The Reason For The Rate Reduction
Let the credit card issuer know the reason why you are looking for a reduced interest rate and be honest with them. The reason could be unexpected medical bills, a salary cut, or you want to focus on building your credit and paying off debt. Tell you have been made on-time payments for years and considering a interest rate decrease would be a great reward for being a loyal customer.
3. Try Again in 3-6 Months
If they don’t approve to lower your interest rate wait and try again within 3 to 6 months. Keep detailed notes of all your calls and continue to make your payments on time. If you receive any promotional offers from competing companies make sure to mention them and share the lower rate card offers. While you can threaten to cancel your credit card if they don’t agree to lower your interest rate, canceling any credit card can lower your credit score and hurt your chances of getting approved for better credit card offers.
4. Contact Another Credit Card Company
If you don’t get a lower interest rate on the credit card you have the longest you might want to try talking to a different credit card company that you have. Each credit card company has their own terms and processes so while you might not be able to negotiate with one company you might be able to negotiate with another company. Any interest you can save will help while you pay down your down. Remember when you pay off you debt always start with the credit card that has the highest interest rate first.
How To Avoid Credit Card Interest?
The most financially successful people don’t waste their money on credit card interest. Use these simple strategies to avoid paying interest on credit cards.
- Pay your credit card bill in full before the due date do you don’t get charged interest or late fees.
- Apply for a new 0% interest credit card. There are many credit cards that offer over 12 months of no-interest so it can give you time to pay off your credit cards before interest is applied.
- Get a balance transfer credit card and transfer the balance of your current credit card to the new one.
- Apply for a loan to pay off multiple credit card debt. Some loans offer lower interest rates than credit cards saving you money.
Credit Card Interest Vs Loan Interest
The difference between credit card interest and loan interest is that personal loans tend have lower interest rates than credit cards. Personal loans must be paid over a set period of time while credit cards provide revolving access to funds that you can use. If you have a high credit score your interest rates will be much lower.
Credit cards have compound interest which is a percentage levied on the balance of a credit card which is then compounded on a recurring daily basis.
Loans have simple interest which is a percentage that was predetermined by the lender from factors like the amount borrowed and the length of repayment.
Loans are best for large purchases such as a car, home, home renovations, weddings and more.
Credit cards are best for small every day purchases that you can pay off each month.
How do Loan interest rates work?
When you take out a loan you are getting the lump sum of money up front and must pay it back within a set period of time. The interest rate on loans are typically lower than credit cards. Interest rates are also determined on your credit score. If you have a bad credit score your interest rate may be higher.
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Best Types Of Loans
– Unsecured loans: these types of loans can be obtained even when credit history is bad and often require no collateral.
– Secured loans: these types of loans will usually be repaid with the lowest credit interest rates, which means they are best for repaying any debts you have in addition to your student loan.