APR & interest
Annual Percentage RateAPR is the yearly interest rate. CardLab applies it with the average daily balance method: a daily rate is charged on each day’s balance, then added up across the cycle.
Lose your grace period and carry a balance, and interest accrues every single day.
Interest grows with time and balance, so pay sooner and pay more to shrink it.
Common questions
How is credit card interest actually calculated?
Your APR is divided into a daily periodic rate - APR divided by 365, or 360 at some issuers. That rate is applied to each day's balance across the cycle and the daily charges are added up. This is the average daily balance method, which is why paying earlier in the cycle costs less than paying on the due date.
What APR will I actually pay if I never carry a balance?
Effectively zero on purchases. As long as you pay each statement balance in full by its due date, the grace period keeps new purchases interest-free and the APR never applies. The rate only starts mattering the first month you carry a balance forward.
Is a lower APR always better?
It matters only if you carry a balance. If you pay in full every cycle, the APR is irrelevant and rewards or fees decide which card is better. If you do carry a balance, APR is the single largest cost and outweighs almost any rewards rate.