 TITLE: How Does Credit Card Interest Work? CONTENT: How Is Credit Card Interest Calculated?\n---------------------------------------\nIt's not quick or easy to calculate your account's interest charges, but if you want to figure out yours, follow these steps:\n### 1\\. Calculate the Daily APR on Your Credit Card\nTo do this, divide the APR by 365 (the number of days in the year). So if your APR is 16%, then 0.16 \/ 365 = 0.00044 is your daily periodic rate.\n### 2\\. Calculate Your Average Daily Balance\nRemember, your interest is assessed on your average daily balance. So you have to figure out what that is. To do so, you'll have to look back at your statement.\nStart with the unpaid balance—the amount of money you carried over from the previous month's statement. Next, go through your statement to determine what each day's balance was. Note: Your credit card won't tell you your daily balances for the month; you'll need to do it yourself by adding or subtracting individual charges for each date of the billing cycle as they appear on your statement. Add up each daily balance amount and divide it by the number of days in your credit card's billing period. That's your average daily balance.\n### 3\\. Multiply Your Daily Periodic Rate by Your Average Daily Balance\nNow, multiply the daily periodic rate calculated in step 1 by the average daily balance from step 2.\nLet's say your average daily balance came out to $1,200. The calculation would be: 0.00044 x $1,200 = $0.53\n### 4\\. Multiply by the Number of Days in Your Billing Cycle\nFinally, you have to multiply the figure from step 3 by the number of days in your billing cycle.\nIf your billing cycle was 30 days, then you multiply $0.53 by 30 to equal $15.90. You will be charged approximately $15.90 in interest for this billing cycle.\n### 5\\. Factor In Daily Compounding\nMost credit card issuers will compound an account's interest charges daily. That means it will actually multiply each day's average daily balance by the account's daily periodic rate, and then add that amount to the next day's average daily balance.\nTo determine this manually would be extremely time-consuming. Thankfully, the effects of daily compounding are relatively minor over the course of a single month, so you'll get a pretty good estimate from the amount you arrive at in step 4. However, the higher the interest rate, the greater the effect daily compounding will have on the final amount you'll be charged in interest in a given month. END