How Is Credit Card Interest Computed?

Question

Specifically: Let's say I had zero $ charges until I racked up $10,000 in charges this month! When this month's bill comes, I pay $9,000...leaving $1,000 until next month.

Now, will my next-month bill have interest due on $1,000, or $10,000?

I know "common sense" says $1,000 ... but lately, I'm seeing things in the bills that make me uncertain...

...thanks for any of your knowledgable insights.

Answer 1

If you pay the whole $10K, you pay no interest.  That's because the credit card gives you a grace period before charging interest.

If you only pay part, they calculate interest on the average daily balance.  They add up each days balance and divide it by the number of days.  The interest is applied to that number.

So if you are only pay part of the balance, pay it early.  It lowers your average daily balance.

Answer 2

unfairly