The Simple Version

APR stands for annual percentage rate. It is the yearly interest rate on your card, but credit card interest is usually calculated in smaller daily or monthly pieces.

If you pay your full statement balance by the due date, you can usually avoid purchase interest. If you carry a balance, the card issuer can charge interest on the unpaid amount.

Example: A $3,000 balance at 24% APR costs about $60 in interest for one month before payments and new purchases are considered.

Why It Adds Up

Credit card interest can grow quickly because many cards have high APRs. When most of your payment goes toward interest, less money goes toward reducing the balance.

  • Higher balances create higher interest charges.
  • Higher APRs make debt more expensive.
  • Small payments can stretch payoff time.

What Helps

Paying more than the minimum, avoiding new purchases on the card, and focusing on the highest-interest balance first can reduce the total interest paid.