If you borrow money using a credit card, you’ll be charged interest on any unpaid balance at the end of each billing cycle.
Let NerdWallet Canada’s credit card interest calculator run the numbers, or use the guidance below to calculate your credit card interest by hand.
How do I calculate credit card interest?
You can calculate your credit card interest in four steps.
1. Find the daily rate
Divide your credit card’s annual percentage rate, or interest rate, by 365. The result is your daily rate.
Example: Your credit card’s interest rate is 19%. Divide 19 by 365 for a daily rate of 0.052%.
2. Determine the average daily balance
Record your credit card’s daily balance throughout a single billing cycle. Add up these numbers and divide them by the days in your billing cycle. This is your average daily balance.
Example: Add up your card’s daily unpaid balance over a 30-day billing period for a total of $15,000. Divide $15,000 by 30 for an average daily balance of $500.
3. Find the daily interest charge
Take your average daily balance and multiply it by your daily interest rate. The result is the average interest generated daily for that billing cycle.
Example: Multiply your average daily balance of $500 by your daily rate of 0.052%. The result is $0.26. This is the amount of interest your card generates in one day.
4. Multiply daily interest by the number of days in the billing cycle
Now that you know how much interest is charged daily, multiply this number by the number of days in your billing period. The result is the amount of interest you’ll pay for the month.
For example: Multiply your daily interest of $0.26 by 30. The result is $7.80. This is the interest your card generates on a $500 daily balance in one 30-day billing cycle.
What is an average credit card interest rate?
Most Canadian credit cards charge about 20% interest on purchases. Some low-rate credit cards offer purchase interest rates closer to 10%, but these are less common.
Other cards may offer interest rates as low as 0% for a promotional period. After the promotional period ends, the card reverts to a higher rate.
How can I avoid interest on my credit card?
Credit card interest can be avoided by always paying your bill in full. Interest-free grace periods of 21 days are standard and typically start at the end of your billing period. You won't be charged credit card interest if you pay your credit card balance in full before your card’s grace period is up.
If you can’t afford to pay your credit card balance in full, making smaller, more frequent payments throughout the month will shrink your average daily balance and reduce the amount of interest you owe.
Frequently asked questions about credit card interest
Interest on unpaid credit card balances is typically calculated daily and charged monthly.
If your credit card has an interest rate of 20%, that 20% rate is divided by 365 days and multiplied by your average daily balance to determine how much interest you owe on an unpaid balance.
Credit card interest rates vary by the type of credit card and transaction. How much interest you pay is based on your creditworthiness and how you use your cards.