Calculating Credit Card Interest Rates: What You Need To Know

by Warren Murray

Financial Well Being Manager


Credit Card Interest rates vary depending on your credit profile. Someone with a higher FICO score may be paying 11% Annual Percentage Rate (APR), while someone with a lower FICO score may be paying 18%.

You may be asking yourself, does the rate really matter? Yes, it does! Your APR is the amount of interest that you will annually pay on your balance. For those carrying balances on their credit cards, your interest rate can make your purchases much more expensive than you bargained for.

How Credit Card Interest Rates Are Calculated:

One thing you need to consider when finding the right interest rate for you is determining how much your monthly payment will truly be. You may be wondering: why does that matter? Well, it matters because you need to make sure you don't get in over your head with credit card bills that are too much too handle. Let's dive into an example: 

Let’s say you buy a new TV for $1,000 with your credit card that has an APR of 18%. You get the bill the next month and all they are asking for is a minimum payment of $20. No big deal, right? Actually, it is. If your balance is not paid off each month, you’ll be paying compounded interest, meaning that the interest is added to your total balance.

You can calculate your monthly interest using this formula: Monthly Interest Rate % = Annual Percentage Rate/12 (months)

Based off this scenario, if you didn’t make any other purchases on your credit card and just paid the minimum payment of $20 each month. It would take you 94 months to pay for that $1000 TV you purchased.1

Coastal's Financial Calculators

At Coastal, we know that you are busy enough with your day-to-day tasks. That's why we've done the heavy lifting for you with our wide variety of financial calculators so you can quickly determine what strategy makes the most sense for you.2

In the below image we used the same financial example we discussed in the section above and showed you using a chart how long it would take to pay it off as well as what your total interest would be.

Credit Card Payoff Calculator

Credit Card Payoff Calculator

So now you can truly see the importance of what your Interest Rate really means. It’s imperative to do your research before selecting a credit card. The good news is there are a lot of options when it comes to finding the perfect credit card for you.

3 Things To Consider

Comparing different cards based on your needs, goals, and the card terms is extremely helpful when it comes to finding the perfect card for you. According to Green Path3, here’s some things you should consider when you’re comparing credit cards:

  • The Annual Percentage Rate (APR): this is how much interest you will pay if you do not pay off your balance each month
  • Fees: many credit cards have yearly fees, late payment fees, balance transfer fees, etc.
  • Credit Limits: your credit limit is right for you when it is in line with what you can afford to pay back. ­­

Looking To Payoff Your Debt Faster?

Try Coastal's Credit Card Payoff Calculator to create a payoff plan that meets your needs. 

Coastal's Credit Card Payoff Calculator


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1. Payment example source:

2. Financial calculators are for illustrative purposes only. It is not a guarantee of credit.