APR, daily rates, and balances
A credit card APR is an annualized rate. Issuers commonly convert it to a daily periodic rate and apply it to balances according to the card agreement. The exact method can vary, but average daily balance is common.
Payments reduce the balance, but interest may continue accruing until the balance is fully paid and any grace-period rules are restored.
When to use the Credit Card Interest Calculator
Use the Credit Card Interest Calculator when you want to estimate payoff time, total interest, and savings from paying more than the current amount.
It is most useful for planning because it turns APR into a monthly payoff path. The result is an estimate, not a substitute for the issuer’s statement calculation.
How extra payments reduce interest
Interest is generally based on the outstanding balance. When extra payments reduce principal earlier, future interest has a smaller balance to accrue on.
This is why an extra payment can save more than the first month suggests. The benefit compounds through the remaining payoff schedule.