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1. Find out which method your credit card company uses to calculate your interest. The is usually found on the back of your credit card statement. Most use the average daily balance method. Also find out how many days are in your billing cycle.
2. Calculate your average daily balance. If you have a billing cycle of 30 days and you carried a balance of $1000 from day 1 to 15 (15 * 1000). On day 16 you made a payment of $500 and did not make anymore credit card transactions for the remaining 15 days. So for days 16-30, your balance was $500 (15 * 500). Your average daily balance is (15 * 1000) + (15 * 500) divided by 30 days. This is $750, which means you carried on average a balance of $750 each day.
3. Find your APR which is also located on your credit card statement.
4. Divide your APR by 365 to obtain your daily rate. If your APR is 12 %, your monthly rate will be 0.32767 %. Multiply your daily rate and your average daily balance and divide by 100. This would be $750 * 0.32767/100 = $0.2465753. Each day you pay an interest of $0.2465753 on your average daily balance of $750. In your 30 day billing cycle you will pay $7.40 ($0.2465753 * 30 ).
5.Use the Finance charge calculator to check you work.
