You also need to factor in the cost of any annual fees associated with the card, as these may be included in the overall APR figure for the year. However, some credit cards have longer interest-free periods which will also affect the amount of interest you are charged. It will cost less to borrow money than if your credit card had a high APR. How does credit card interest work?Ĭredit card interest rates are usually quoted in terms of APR (annual percentage rate).Ī low or lower APR means you will have less interest to pay on your credit card debt. Interest rates are one of the ways to work out how much it will cost you to use your credit card, along with other charges and fees. Being able to understand and calculate interest on a credit card is essential if you are thinking about applying for a card and you want to find one that is best for your needs. Understanding how to calculate credit card interest will help you find the best credit card for you. Different cards have different interest-free periods and different APRs, and this can make a big difference to the charges you pay. How much you pay depends on the interest rate of the card, known as the Annual Percentage Rate or APR. If you do not pay off the full credit card debt and instead pay the minimum amount, you will be charged interest on the remaining balance.
With a credit card, the money is added to your credit card balance, and you have the option to pay the amount off in full when you receive a monthly credit card statement. When you spend on a debit card, the money leaves your account within a day or two. There are two types of bank cards available in the UK - debit cards and credit cards.
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