Banks are notorious for making numbers complicated. Even something as seemingly simple as your credit card’s annual percentage rate (APR) becomes complex when trying to calculate how banks get that number.
And you being a responsible consumer are rightfully concerned as to how this perplexing number determines what you’re paying in interest charges. We’ve broken it all down for you as simply as possible and will show you:
- Three simple steps for calculating your APR
- How to pay no interest at all with a balance transfer
- The best balance transfer cards available today
We’ll take you through step by step and explain the hows and whys of each. Let’s get started with calculating your APR.
3 Steps to Calculate Your APR
It’s actually quite easy once you know the equation, which we’ll explain here.
1. Find Your Average Daily Periodic Rate
Your Average Daily Periodic Rate can be found on the bottom of your monthly statement. We’ll call it ADPR. This number will be very low and may not seem like much, but this is what you are being charged in interest on average daily. We’ll touch more on this in step 2, but for the purpose of this calculation, we’ll assume it’s .04654.
2. Multiply ADPR By 365
Take the ADPR (.04654) and multiply it by 365, which represents days in a year. You use the number of days in a year because you don’t actually get charged an APR once a year, but rather your interest compounds daily. Your ADPR represents what you’re being charged each day and is determined by your outstanding balance. Banks use the average balance over the entire billing cycle.
(.04654)(365) = 16.987
Note: Some credit card issuers use 360 instead of 365, according to the CFPB.
3. View Your APR
Round that number up and voila! 16.99% is your APR. To reiterate, the calculation is:
(ADPR)(365) = APR
See, wasn’t that easy?
Transfer the Balance and You Could Pay $0 Interest
If you’ve done the math and are now displeased with what you’re seeing, there’s a way for you to stop paying interest altogether for a while. It’s called a 0-percent intro APR, and some cards offer them for up to 18 months.
This works by applying for a new card and transferring your current balance to the new card. You’ll receive up to 18 months of an interest-free balance AND most of the cards even offer 0 percent interest on purchases. This means everything charged to the new card will also be interest free for a while, depending on your agreement.
The Best Balance Transfer Credit Cards Available
Our experts are always looking for the best balance transfer cards, as they’re such a popular option among consumers today who are sick of paying sky-high interest rates. Granted, many factors determine the interest you’re being charged, but if you have good credit, you’ll likely qualify for one of these cards.
Below are a few of our experts’ top picks, but to see the full list, visit our balance transfer review page.
at Discover Card'ssecure website
- INTRO OFFER: Discover will match ALL the cash back you've earned at the end of your first year, automatically. There's no signing up. And no limit to how much is matched.
- Earn 5% cash back at different places each quarter like gas stations, grocery stores, restaurants, Amazon.com and more up to the quarterly maximum, each time you activate. Plus, earn unlimited 1% cash back on all other purchases - automatically.
- Redeem cash back any amount, any time. Rewards never expire.
- 100% U.S. based customer service.
- Get your free Credit Scorecard with your FICO® Credit Score, number of recent inquiries and more.
- Get an alert if we find your Social Security number on any of thousands of Dark Web sites.* Activate for free.
0% for 6 months
0% for 18 months
14.24% - 25.24% Variable
at Chase'ssecure website
- New Offer! Double Cash Back: Earn 3% cash back on all purchases in your first year up to $20,000 spent. After that earn unlimited 1.5% cash back on all purchases.
- 0% Intro APR for 15 months from account opening on purchases and balance transfers, then a variable APR of 17.24-25.99%. Balance transfer fee is 3% of the amount transferred, $5 minimum
- No minimum to redeem for cash back
- Cash Back rewards do not expire as long as your account is open
- Free credit score, updated weekly with Credit Journey℠
- No annual fee
0% Intro APR on Purchases 15 months
0% Intro APR on Balance Transfers 15 months
17.24% - 25.99% Variable
- One-time $150 cash bonus after you spend $500 on purchases within 3 months from account opening
- Earn unlimited 1.5% cash back on every purchase, every day
- No rotating categories or sign-ups needed to earn cash rewards; plus, cash back won't expire for the life of the account and there's no limit to how much you can earn
- 0% intro APR on purchases for 15 months; 16.24%-26.24% variable APR after that
- 0% intro APR on balance transfers for 15 months; 16.24%-26.24% variable APR after that; 3% fee on the amounts transferred within the first 15 months
- Pay no annual fee or foreign transaction fees
0% for 15 months
0% for 15 months
16.24% - 26.24% (Variable)
By understanding your APR, you’ll be able to comprehend how interest is calculated and tacked on to your monthly bill. This should prompt you to pay your balance off every month. However, if you carry a balance, hopefully by now you’ve decided you’re not going to settle for paying high interest (or any interest!) any longer and are ready to transfer that balance to a 0 percent intro APR card that will treat you better.