Your Credit Card Interest

To calculate the interest on your card each month, the lender multiplies the card's interest rate (the APR) times your credit card balance. This will give the interest for the entire year. The lender will divide this interest calculated by the number of months in the year, or 12. The sticky part is calculating the credit card balance. his is why it's important to choose a card with a grace period. You want to find a low credit card interest rate. With a low credit card interest rate you don’t have to worry about paying an arm and a leg if you miss a payment. If you do have a balance on your card, there are three methods of calculating it:

Average daily balance

With average daily balance (the most common method), the issuer calculates the balance by taking the amount of debt you had in your account each day during the period covered by the billing statement and averaging it.

Previous balance

With this method, the issuer uses the balance outstanding at the end of the previous period-- that is, the period prior to the one covered by the current billing statement.

Adjusted balancemethod

With this method, the balance is derived by subtracting the payments you've made from the previous balance. 

A low credit card interest rate may not seem very important when you are first getting a credit card, but it is if you fall behind on payments. Don’t ever stop you search for a low credit card interest rate, even after you already have a credit card, you never know what’s out there.