Credit card interest: monthly estimate and daily balance
Understand the simple APR estimate before comparing it with a statement’s daily-balance calculation.
Method
The monthly estimate is balance × APR ÷ 12, with APR expressed as a decimal. It assumes a fixed balance for the month and does not reproduce every card agreement. Many issuers use a daily periodic rate and an average daily balance. The day on which a payment posts can therefore change the interest, even when the total payment is unchanged.
Worked example
A balance of 3,000 at 22% APR gives a simple monthly estimate of 3,000 × 0.22 ÷ 12 = 55. Subtracting a 200 payment after this interest gives 2,855. Separately, using a 365-day divisor and a fixed balance for 30 days gives about 54.25 before any daily compounding. Those are model examples, not guaranteed statement charges.
What to check
Check the issuer’s divisor, grace-period eligibility, payment posting date, fees and separate purchase/cash-advance rates. Enter a payment only once. The CFPB explains why daily-rate methods differ; use the agreement and statement when reconciling an actual charge.