Money · Debt

APR and interest in plain English

APR is the yearly price of borrowing. Card interest is usually charged daily on your average daily balance, so a $1,000 balance at 24% APR costs roughly $20 a month. Pay the full statement balance by the due date (at least 21 days after the bill arrives) and most cards charge no interest on purchases. Miss once and you can lose that grace period for two months. Cash advances charge interest from day one. Anything you pay above the minimum must go to your highest-rate balance first.

Easy10 min to readFreeChecked October 2, 2026

You'll need

A recent credit card statement, paper or in the app

What to know

Find the APR on your statement or card agreement. It's the price of borrowing, shown as a yearly rate. Source: CFPB¹ Your statement must list each type of balance that has a different APR, like purchases and cash advances, and how much you owe in each. Source: CFPB³
Know how interest is figured. Many card companies charge interest every day, based on your average daily balance, using a daily periodic rate. Because it builds daily, paying sooner means paying less interest if you don't have a grace period. Source: CFPB³
Do the rough math. Divide the APR by 12 for a monthly rate, then multiply by your balance. At 24% APR, that's about 2% a month: about $20 on $1,000, or $60 on $3,000. Real charges vary a little because interest is calculated daily.
Find the due date. Card companies must get your bill to you at least 21 days before payment is due. Source: CFPB²
Pay the full balance by the due date. Most cards give a grace period on purchases: if you weren't carrying a balance and you pay in full on time, you pay no interest on new purchases. Card companies don't have to offer one, so check yours. Source: CFPB²
If you can't pay in full, pay as much over the minimum payment as you can. The card company must generally put the amount over the minimum toward your highest-rate balance first. Source: CFPB³ See how long payoff takes in the credit card payoff calculator.
Skip cash advances and card "convenience checks." Interest on those generally starts the day you take the cash. Source: CFPB²

Watch out If you don't pay in full one month, you can lose the grace period for that month and the next. You'll pay interest on the unpaid balance, and new purchases start costing interest the day you make them. Source: CFPB² A 0% balance transfer doesn't protect new purchases either: if you carry a balance, purchases usually earn interest from the day you buy. Source: CFPB⁴

What a balance costs per month

Rough monthly interest: balance × APR ÷ 12. Actual charges vary slightly because most cards calculate interest daily.

Balance	At 18% APR	At 24% APR	At 30% APR
$500	about $7.50	about $10	about $12.50
$1,000	about $15	about $20	about $25
$3,000	about $45	about $60	about $75

APRs side by side

Same idea, very different prices.

Borrowing	Typical APR
Credit cards (average, early 2023)	Just under 21% Source: FTC⁷
Car title loan	About 300% Source: FTC⁷
Payday loan, $15 per $100 for two weeks	Almost 400% Source: CFPB⁶

Keep your grace period

Turn on autopay for the full statement balance, or at least the minimum as a backstop
Set a reminder a few days before the due date
Don't use the card for cash
Charge only what's already in your checking account

See it done

Video by Khan Academy Nonprofit

Credit 101: What is APR and why does it matter?

Watch on YouTube: Credit 101: What is APR and why does it matter? | Financial mathematics (TX TEKS) | Khan Academy

Full title on YouTube: “Credit 101: What is APR and why does it matter? | Financial mathematics (TX TEKS) | Khan Academy”2023 · Checked October 3, 2026

Video won't load at school or work? No problem. Everything you need is in the steps; the video's just a bonus. Watch it on YouTube later.

If it doesn't work

Carrying a balance on a card you closed? You still have to pay it on schedule, and interest can keep building. Source: CFPB⁵
Can't keep up? See Payday loans and other expensive traps for cheaper options and free credit counseling, before you borrow more.

Good to know

The details, if you want them. Tap a line to open it.

Why minimums hurt

Paying only the minimum keeps you current, but much of each payment goes to interest, so the balance shrinks slowly. The calculator shows how long it takes.

Cars and loans have APRs too

When you finance a car, compare the APR and the total cost, not just the monthly payment. Source: FTC Lenders must show the APR and finance charge in writing before you sign. Source: FTC⁷

Take it with you

Printable card Download card (PDF)

Sources

Consumer Financial Protection Bureau What is a credit card interest rate? What does APR mean?
Consumer Financial Protection Bureau What is a grace period for a credit card?
Consumer Financial Protection Bureau How does my credit card company calculate the amount of interest I owe?
Consumer Financial Protection Bureau Do I pay interest on new purchases after a 0% balance transfer?
Consumer Financial Protection Bureau Can a credit card company charge me interest after I close my account?
Consumer Financial Protection Bureau What are the costs and fees for a payday loan?
Federal Trade Commission Payday loans and car title loans

Lesson M5.1 · Last checked October 2, 2026 against the sources listed.

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