Finance Charge Calculator
Calculate the cost of borrowing on credit cards and loans over billing cycles or given terms
Calculate Finance Charges
Outstanding balance on your credit card or loan
Annual interest rate charged on the balance
Number of days in your billing cycle (typically 28-31 days)
Finance Charge Results
Formula used: Finance Charge = Balance × APR ÷ 365 × Days
Input values: Balance: $0, APR: 0%
Billing cycle: 30 days
Example Calculation
Credit Card Example
Current Balance: $1,000
Annual Percentage Rate (APR): 18%
Billing Cycle Length: 30 days
Calculation Steps
1. Convert APR to decimal: 18% ÷ 100 = 0.18
2. Calculate daily rate: 0.18 ÷ 365 = 0.00049315
3. Daily finance charge: $1,000 × 0.00049315 = $0.49
4. Billing cycle charge: $0.49 × 30 = $14.79
Common Calculation Methods
Average Daily Balance
Most common method used by credit card companies
Daily Balance
Calculates finance charge on each day's balance
Adjusted Balance
Subtracts payments before calculating charges
Previous Balance
Uses last billing cycle's ending balance
Minimize Finance Charges
Pay your full balance before the due date
Take advantage of grace periods (typically 21-25 days)
Avoid cash advances which accrue interest immediately
Consider balance transfers to lower APR cards
Pay more than the minimum payment
Understanding Finance Charges
What is a Finance Charge?
A finance charge is the total dollar amount you pay to use credit. It represents the cost of borrowing money and includes interest charges as well as other fees associated with your credit account.
When Do Finance Charges Apply?
- •When you carry a balance past the due date
- •On cash advances from the transaction date
- •When you miss minimum payment deadlines
- •For balance transfers depending on terms
Calculation Formula
Finance Charge = Balance × APR ÷ 365 × Days
- Balance: Outstanding amount owed
- APR: Annual Percentage Rate (as decimal)
- Days: Number of days in billing cycle
- 365: Days in a year for daily rate calculation
Grace Period: Most credit cards offer 21-25 days with no interest if you pay in full.
High APR Impact
APRs above 20% can quickly accumulate significant finance charges, especially on large balances.
Compounding Effect
Unpaid finance charges are added to your balance, creating a compounding effect that increases future charges.
Payment Strategy
Paying more than the minimum payment reduces the principal balance and future finance charges.