Q:

# How much interest does MasterCard charge on balances?

A:

The interest charged on a MasterCard balance depends on the annual percentage rate assigned to the individual credit card account. The amount of interest charged per day changes due to the addition of interest charges to the outstanding balance on a daily basis, according to NerdWallet.

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To calculate the interest charges, a cardholder can find the periodic interest rate first. The periodic interest rate is the APR multiplied by 360 or 365, depending on the card issuer. For example, a balance of \$1,000 and an APR of 15 percent requires dividing 15 by 365, equaling a periodic interest rate of 0.041, explains NerdWallet.

To calculate the average daily balance, the cardholder can take the total sum of each day's balance and divide it by the number of days in the billing cycle, instructs Investopedia. If a card has a 30-day billing cycle with a balance of \$1,000, and the cardholder makes a \$200 payment on day 11, the calculation would be (10 x \$1,000 + 20 x \$800) / 30 = \$866.67. The formula to calculate the monthly interest charge is the average daily balance multiplied by the periodic daily interest rate, multiplied by the number of days in the month, notes NerdWallet.

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