Figure out a credit card interest is not that difficult. However, it is important to follow some steps. 

However, you must be wondering: why should I learn how to calculate the APR of my card? 

Well, that’s fundamental to tracking and keeping your finances in good standing.

Imagine that you miss a balance payment. This situation may take you to sink into debt because of the interest applied to outstanding balances.

Then, continue reading to track your credit card closely and control your finances.

APR means Annual Percentage Rate. This rate refers to a measure of the total cost of borrowing money over a year. 

Thus, the APR includes both the interest rate charged on a credit card balance as well as any other costs related to a loan. It is important to remember that having a credit card is equivalent to maintaining a loan. 

In essence, the Annual Percentage Rate is the true cost of borrowing. 

Additionally, lenders or any other financial institution, including banks, are legally required to disclose the APR for credit products offered.

Therefore, consumers will be able to compare the true costs of different credit solutions and choose the one that’s best for their needs, objectives, and budget.

If you want to learn how to figure out a credit card interest, you need to understand how it works first.

To sum up, a credit card APR is the interest rate that bank charges on outstanding balances on your credit card. 

Also, the APR is represented as a percentage of the amount you owe or the balance, and it shows the cost of borrowing money when you use your card, whether making a purchase or using it for something else.

Typically, the credit card issuer or bank calculates the interest you owe daily. This is based on your outstanding balance, and it is added to your balance at the end of each billing cycle, usually taking 30 or 31 days. 

Interest will apply if you miss a balance payment or pay the least.

Otherwise, you won’t be charged any interest by paying the outstanding balance in full each month.

Moreover, take a look at the different types of interest a bank or other card issuer may charge:

Traditionally, banks disclose the APRs of a credit card right on their official websites. So, you can get advanced notice about how much it would cost if you apply for the card.

However, APRs vary according to your creditworthiness and each institution’s terms and conditions.

APRs can also be fixed or variable.

Furthermore, some institutions may offer promotional APRs for a period of time. 

Although it is a great way of avoiding interest in the first months, it is even more recommended to only apply for a card if you can manage to pay an outstanding balance in full.  

So, now you know how APR work and its definition, it is time to calculate yours from your credit card.

Follow the step-by-step below, then.

In the first place, check out your statement to find the current APR and your balance. 

This process can be done for both monthly and daily APR calculations. 

In the second place, divide the APR per 12 (total months in a year) to calculate the monthly APR. It will define your periodic rate.

If you want to calculate your daily APR, divide the rate per 365 (total days in a year). 

Finally, multiply the monthly or daily periodic rate in step 2 by the amount of your current balance found in step 1.

For example, if you want to find your monthly APR by holding a credit card with a purchase APR of 18%. And your balance is $500.

Then, you must divide 18% by 12, which is 1.5%.

After that, multiply the balance of $500 with the rate of 1.5%, which is $7.50. 

In summary, you will be charged with an interest of $7.50 each month, based on the information of the current APR and current balance.

You can calculate the approximate interest previously to applying for a credit card. Thus, you will be aware of how much interest you would pay in case of missing a payment.

As can be seen, knowing how to calculate the APRs is essential. Being able to do that will allow you to avoid debt in the future.

However, it is equally important to know how to choose a credit card, not only by checking the APRs but also by finding the best offerings.

On the other hand, as you probably know, choosing the right credit card can be challenging and overwhelming since there are so many options available on the market. 

In addition, it is essential to consider your spending habits, budget, lifestyle, and financial objectives, so that you can find a card that best suits your needs and pocket.

On the following article, you will find a complete guide on how to choose a credit card. Take a minute to look at it and choose the right option for you!