How much interest will I pay?
To determine how much interest you’ll pay on your current balance:
X * Y * Z = Total Interest payment
Depending on whether your issuer compounds interest daily or monthly, your actual interest charge might differ slightly from this calculated amount. Compounding is the process of adding the accrued interest into your unpaid balance so that you are paying interest on interest.
Compounding is the reason you could pay more than your APR in interest. For example, say your average daily balance was exactly $1,000 for the entire year. If the bank had an 18% interest charge just once at the end of the year, you’d pay $180. But since your interest compounds, you’d actually be the hook for something closer to $195.
Interest rates can vary anywhere from 18–27%!
That’s $320.03 in savings JUST by switching to a card with a lower interest rate.