Credit Card Interest Calculator
Work out how much interest you’ll pay and how long it will take to clear your credit card balance
Your Repayment Summary
How Credit Card Interest Works
Credit card interest is calculated daily based on your outstanding balance and Annual Percentage Rate (APR). When you don’t pay your full statement balance by the due date, interest charges apply to the remaining amount.
Daily Interest Calculation
Your APR is divided by 365 days to give a daily interest rate. This daily rate is then applied to your outstanding balance each day, creating compound interest that grows over time.
Minimum Payment Structure
Most UK lenders set minimum payments at 2.5% of your balance plus interest and fees, or £5-£25 (whichever is higher). Paying only the minimum extends repayment time significantly.
Interest-Free Period
New purchases typically enjoy up to 56 days interest-free, but only if you pay your previous statement balance in full. Missing this payment means interest applies to all balances.
Important Disclaimer
This calculator provides estimates only. Actual costs may vary depending on how you use your credit card, when payments are processed, and changes to interest rates. Always check with your card provider for exact calculations.
Strategies to Reduce Interest Costs
Pay More Than the Minimum
Increasing your monthly payments, even by £20-£50, can save hundreds of pounds in interest and reduce repayment time by months or years. Payments are typically allocated to highest-interest balances first.
Consider Balance Transfers
Moving your balance to a card with a lower APR or 0% promotional rate can provide significant savings. However, balance transfer fees (usually 2-4%) and the eventual standard rate should be factored into your decision.
Avoid New Purchases
Adding new purchases while carrying a balance means losing the interest-free period on those purchases. Focus on clearing existing debt before using the card for new spending.
Money-Saving Tip
Set up a Direct Debit for more than the minimum payment to avoid late fees and maintain consistent progress on debt reduction. You can always make additional payments when possible.
Frequently Asked Questions
Interest is calculated daily using your APR divided by 365. This daily rate is applied to your outstanding balance, creating compound interest. For example, a 24% APR equals approximately 0.066% daily interest.
Making only minimum payments (typically 2.5% of balance) means most of your payment goes towards interest rather than reducing the principal debt. This can extend repayment time to decades and cost thousands in additional interest.
Yes, by paying your full statement balance by the due date each month. This maintains the interest-free period on purchases. However, cash advances and balance transfers typically incur immediate interest charges.
Promotional rates apply to specific transactions (purchases or balance transfers) for a limited time. After the promotional period ends, the standard APR applies to any remaining balance from those transactions.
Your APR depends on your credit score, the card type, and the Bank of England base rate. Many UK credit cards have variable rates that move with the base rate, while others offer fixed rates for promotional periods.
Types of Credit Card Interest Rates
Purchase APR
The standard rate applied to everyday purchases when you don’t pay the full balance. This is typically the lowest rate on your credit card and what most people refer to as their “interest rate.”
Cash Advance APR
Usually higher than the purchase rate and applies immediately to cash withdrawals, money transfers, and quasi-cash transactions like gambling. There’s typically no grace period for cash advances.
Balance Transfer APR
The rate applied to balances moved from other credit cards. Often features promotional 0% periods, but reverts to a standard rate afterwards, which may be higher than the purchase APR.
Penalty APR
Applied when you miss payments or breach other terms. This rate can be significantly higher than standard rates and may apply to your entire balance, not just new transactions.
References
- Bank of England. (2024). “Bank Rate.” Available at: https://www.bankofengland.co.uk/monetary-policy/the-interest-rate-bank-rate
- Financial Conduct Authority. (2023). “Credit Cards Market Study Final Report.” FCA Publications.
- Citizens Advice. (2024). “Credit card debt.” Available at: https://www.citizensadvice.org.uk/debt-and-money/
- Money and Pensions Service. (2024). “Credit cards guidance.” Available at: https://www.moneyhelper.org.uk/en/money-troubles/dealing-with-debt/credit-cards
- UK Finance. (2024). “Credit Card Statistics.” Available at: https://www.ukfinance.org.uk/data-and-research/data/credit-cards
- StepChange Debt Charity. (2024). “Credit card debt help.” Available at: https://www.stepchange.org/debt-info/credit-card-debt.aspx