How Credit Card Interest Works: The Math

Have you ever wondered how credit card interest works? How do they determine how much you owe?

Your credit card probably lists an annual interest rate, an “APR”. This video will explain how to use your APR to figure out exactly how much interest you will owe on your credit card bill. The banks usually use a method called “Average Daily Balance”. This video works though an example of the math, so you can get a deep understanding of what goes on behind the scenes.

Don’t forget to watch How Credit Card Grace Periods work to avoid interest all together:

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