Calculating the finance charges that will be applied to your credit card bill is important and easy to do. It is important to calculate finance charges, so that you will be able to pay off your credit card more quickly and efficiently. Most banks use a 360 day year, versus a 365 year to calculate interest because it makes the math easier. Always check the terms on the credit card to verify the correct interest rate and the length of the year.
Step 1
Check your current balance for the last billing cycle on the Internet. You will also want to determine what your current interest rate is.
Step 2
Look on the back of your statement to determine your billing cycle and how the bank calculates the year. In the event that you can't find this information you can use a 365 day year and 30 days for your billing cycle.
Step 3
Take the interest rate and divide it by the length of the year. This number is the amount of interest you pay per day on your balance.
Step 4
Multiply the daily interest rate by the days in the billing cycle. This is the periodic or one month interest rate you pay on the balance.
Step 5
Multiply your current balance by the monthly interest rate. This will tell you the total interest you will pay.
Step 6
Add the total interest and your current balance. This is the total amount that will appear on your next monthly bill.
Tips and Warnings
- There are some websites offer credit card calculators to speed up the calculations.
Things You'll Need
- Current Balance
- Credit Card Interest Rate
- Length of the Year
- Calculator
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