The credit card calculator below is designed to show you the true cost of your credit cards. Whether you’ve got a balance and you’re wondering about what  the true cost will be, or your trying to compare and evaluate between different cards, this calculator will work for you.

You can enter your credit amount, your interest rate and how frequently it’s charged (and compounded). You can also enter details about account fees and other charged to make the real result more accurate. Include how much you’re planning on paying off per month and the calculator will tell you how long it will take you to repay the balance and how much interest you’ll be charged.

Note that I’ve written an article about credit cards, including the difference between APR and APY and how to make a strategy to take care of your credit here.

APR – Annual Percentage Rate

The APR is a better measure of the true cost of credit, this is because it considers:

  • How frequently interest is charged in a year
  • The impact of account fees on the “true” interest rate

APR provides a great tool to evaluate between different credit cards and generally speaking, the card with the lowest APR is the most superior- if you plan on not paying the card off in full every month. Most lenders these days are required to disclose the loans actual APR in the fine print so make sure you look out for it.

APR is calculated by taking the simple interest rate, and multiplying by the amount of times it is charged in a year. it also deals with account fees by converting it to a rate that reflects the true cost of a credit card balance.

Note that the calculator above assumes a fixed APR throughout the life of the loan. In reality, the APR would change depending on the fees compared to the value of the loan. Sometimes account fees are charged simply as a percentage of the balance, if this is the case, leave the fee section blank and add the amount to the interest rate. Also, if you already know your APR simply change the interest frequency to annual and enter your APR as the rate.

APY – Average Percentage Yield

Most lenders won’t show you the APY rate when you apply for a credit card, however it’s still important to understand. While APR is just the interest rate multiplied by the charging periods in a year. APY includes another important factor- compounding interest. Compounding interest is the interest charged on interest. Take another look at the calculator above. What happens when our monthly repayments fall below a certain level? Our total balance goes up. What would it look like if we graphed our balance over time?

not only does the balance get increase, but it increases at an increasing rate. If your repayment rate falls to the point where you’re not paying off the interest amount, the balance over time gets steeper and steeper until it’s almost vertical. This is because you’re paying interest on the interest and then interest on that interest and so on. It’s theoretically a never ending cycle. It’s easy to see how people get themselves into positions where they find it almost impossible to pay down their debt.