Credit card interest is worked out from the APR and charged on whatever you still owe. This site's calculators divide the APR by 12 to get a monthly rate: at 26.99% APR that is 2.25% a month, or $67 in month one on a $3,000 balance. Your payment covers that interest first, and only the rest of it lowers the balance.
The formula: APR divided by 12, on what you still owe
This site's calculators work it out the same way every month:
- Take the APR from your statement.
- Divide it by 12. That is the monthly rate.
- Multiply the monthly rate by what you still owe. That is the month's interest.
- Subtract that interest from your payment. Only what is left reaches the balance.
A round rate makes the steps easy to check. 24% APR is 2% a month, so the first month's interest is $80 on $4,000 and $120 on $6,000. In the calculators, each payment lands at the end of the month, after that month's interest has been charged.
The same division works for any rate. Here are the APRs used on this page and the monthly rates they turn into:
- 24% APR: 2% a month.
- 26.99% APR: 2.25% a month.
- 28% APR: 2.33% a month.
- 30% APR: 2.5% a month.
How much is 26.99% APR on $3,000 or $5,000?
Take 26.99% as the example rate here. It is simply the rate in the question, not a typical one. Divided by 12, it comes to 2.25% a month:
- On $3,000: $67 of interest in month one.
- On $5,000: $112 of interest in month one.
These are first-month figures, not a fixed monthly cost. The interest is worked out again each month on the new balance, so it changes as the balance changes. To find your own first-month figure, divide your APR by 12 and multiply by your balance, or let the calculator do it.
What the card costs over time depends on the payment. On $3,000 at 26.99%, with nothing new charged:
- $100 a month: month one splits into $67 of interest and $33 off the balance. The math says 51 months (about 4.3 years) and $2,050 of interest.
- $150 a month: the math says 27 months (about 2.3 years) and $1,030 of interest.
Compared with $100, the $150 payment saves $1,020 of interest and 24 months on the same card, as long as nothing new is charged.
Where a $150 payment goes on $3,500 at 28%
The worked example on this site's credit card payoff calculator is a $3,500 store card at 28% APR, paid at $150 a month with nothing new charged. Here is month one, step by step:
- 28% divided by 12 is 2.33% a month.
- 2.33% of $3,500 is $82 of interest.
- The $150 payment covers that $82 first.
- The other $68 reaches the balance.
Keep the same payment going until the card is clear, and the math says 35 months (about 2.9 years), $1,613 of interest and $5,113 paid in all.
Why the interest shrinks, and when a payment never catches up
After month one, the balance is a little smaller. Next month's interest is charged on that smaller balance, so it is a little smaller too, and more of the same $150 reaches the balance. Every month the split tilts a bit further toward the balance. That is also why a bigger payment helps twice: more goes to the balance right away, and the smaller balance then charges less interest in every month that follows.
That only works when the payment beats the interest. If it does not, the balance never falls, and the calculator's answer is "never". On $3,500 at 28%, the line sits at about $82, the first month's interest. A payment at or below it can go in every month without the balance getting any smaller.
Daily or monthly: what card issuers usually do
This site's calculators charge interest once a month at APR / 12. Card issuers usually work interest out daily on your average balance instead. The two methods come to nearly the same amount, so your statement and the calculator should land close together, though not always to the cent.
The rate itself matters more than the method. Use the exact APR printed on your statement rather than a rounded guess, because the payoff date moves with every point of APR.
Penalty and 0% rates change the monthly rate
The method does not change when the rate does. Only the monthly rate moves:
- A 30% penalty APR is 2.5% a month. On $4,500 that is $112 of interest in month one, so a $120 payment leaves just $8 for the balance. The penalty APR calculator shows what one missed payment can cost.
- A 0% promo rate charges no interest at all, so every dollar of the payment comes off the balance. The balance transfer calculator works through a 0% promo example.
Side by side, the same $120 payment puts $8 toward the balance at 30% and all $120 at 0%. The rate decides how much of each payment actually pays down the debt.
Where an extra payment goes
An extra payment on top of the usual one has no interest to cover, so all of it comes off the balance. That is why a modest extra can move the date. On a $4,000 card at 24%, the math says $50 extra a month saves $1,198 of interest and 23 months, if nothing new is charged. The extra payment calculator lets you try your own amount.
One more detail: when a single card carries balances at more than one rate, the amount you pay above the minimum generally goes to the balance with the highest rate first on US cards.
Run your own numbers
Your latest statement has the balance and the exact APR. Run your own numbers in the credit card payoff calculator with your usual payment, then try a bigger one and compare the months and the interest. The other debt calculators cover minimum payments, extra payments and promo rates. This page is educational content, not financial advice. Its examples are illustrative approximations, and for your own situation, consider a licensed professional; the disclaimer has the full wording.