How credit card interest works, and what the minimum payment really costs

Pay your full statement balance by the due date and most cards charge no interest on purchases. Miss that and interest accrues every day at your APR divided by 365. At 22.15%, the Federal Reserve's latest average for card accounts that paid interest, a $5,000 balance paid at the minimum takes 15 years 2 months to clear and costs $7,468.64 in interest.

What card APRs are right now

The Federal Reserve G.19 consumer credit release of September 8, 2026 reports these averages for the second quarter of 2026:

The "accounts assessed interest" figure is the one that applies if you carry a balance. It was 16.45% for 2021, so the average rate on revolving card debt is now 5.7 percentage points higher than it was five years ago.

The grace period decides whether you pay anything

The CFPB's grace period explainer defines it as the time between the end of a billing cycle and the payment due date. Pay the balance in full in that window and purchases cost nothing. Card companies are not required to offer a grace period, but most do on purchases, and issuers must mail or deliver your statement at least 21 days before the due date.

Cash advances and balance transfers usually get no grace period at all. The Chase cardmember agreement, for example, says interest on both starts on the transaction date.

How the daily interest is calculated

Many issuers calculate interest daily on your average daily balance, as the CFPB explains. The Chase agreement shows the full method: divide the APR by 365 to get a daily rate, multiply it by each day's balance, and add each day's interest to the next day's balance. That last step is daily compounding.

Because the balance is measured every day, timing changes the bill when you have no grace period. On a $5,000 balance at 22.15% over a 30-day cycle, a $1,000 payment on day 5 leaves $75.93 of interest. The same payment on day 25 leaves $88.19, so paying 20 days earlier saves $12.25. A $1,000 purchase on day 2 accrues $17.75 by the end of the cycle; on day 29 it accrues $1.21.

What a "small" leftover balance really costs

Leaving a little on the card costs more than interest on the little. Take a $2,000 statement balance. You pay $1,500 by the due date and leave $500. You keep spending $2,000 a month, spread evenly, and pay the next statement in full on its due date. At 22.15%, compounded daily:

That is about seven times the $9.49 most people expect. 12 CFR 1026.54 bans the worst version: issuers cannot charge interest for days in earlier billing cycles, or on the $1,500 you repaid inside the grace period. It does not stop the other two lines. The Chase agreement says you regain the interest-free period by paying the full statement balance by the due date, and that interest "may still appear on your next billing statement" for the days before your payment arrived. This is why the CFPB warns you can lose the grace period for the month you do not pay in full and the month after. Grace terms vary by issuer, so check your own agreement.

What the minimum payment really costs

Chase sets the minimum as the larger of $40 or 1% of the new balance plus that statement's interest and late fees. On $5,000 at 22.15%, the first minimum is $144.05: $93.12 of interest and only $50.93 of principal. The payment is tied to the balance, so it shrinks as the balance shrinks. The 12th payment is $128.71, the 60th is $78.74, and from the 127th payment on it sits at the $40 floor.

Same card, same first payment. Holding the payment at $144.05 instead of letting it shrink cuts the payoff by 10 years 5 months and saves $4,351.86 in interest.

Your statement already does a version of this math. Under 12 CFR 1026.7(b)(12), your monthly statement must carry a "Minimum Payment Warning" showing how long minimum payments will take, what they will cost in total, the monthly payment that clears the balance in 36 months, and the savings from paying that instead. For this example the box would read roughly 15 years and $12,469, versus $192 a month for 3 years, $6,907 in total, and $5,562 saved. Issuers may use simplifying assumptions, so your figures can differ slightly.

One card, several APRs

A single account can carry different rates for different balances. Here is how the Chase agreement prices them, with variable rates based on a 6.75% prime rate as of June 30, 2026:

Federal rules limit the penalty rate. Under 12 CFR 1026.55, an issuer can apply it to your existing balance only after a payment is more than 60 days late, and must restore the old rate on that balance once you make six consecutive on-time minimum payments. Below 60 days, it can apply only to new transactions.

Where your payment goes

12 CFR 1026.53 requires any amount you pay above the minimum to go to the highest-APR balance first. The minimum itself is left to the issuer, as the official interpretation of 1026.53 states, and the Chase agreement applies it to the lowest-APR balance first.

So with a 0% transferred balance and a 22.15% purchase balance on the same card, the minimum can go entirely to the 0% balance, and every dollar above it must go to the 22.15% balance. Paying only the minimum leaves the expensive balance untouched while it keeps accruing 22.15%. One exception: in the last two billing cycles before a deferred interest promotion ends, the excess goes to the deferred balance first.

What to do with this

• Autopay the full statement balance if you can. Interest is then $0.
• If you cannot, fix the payment. Pay at least the first minimum every month, or the 36-month figure printed on your statement. Model your own numbers with the loan payment calculator.
• Pay early in the cycle while you carry a balance, since every day the balance is lower costs less. The statement close optimizer helps you time payments around the closing date.
• Skip cash advances. On the Chase terms above, $500 in cash costs a $25 fee before a day of 28.49% interest.

Frequently asked questions

Sources

1. G.19 Consumer Credit, release of September 8, 2026 (Terms of Credit table), Board of Governors of the Federal Reserve System. Checked October 2026.
2. Cardmember Agreement and Rates and Fees Table (COL00081), JPMorgan Chase Bank. Checked October 2026.
3. What is a grace period for a credit card?, Consumer Financial Protection Bureau. Checked October 2026.
4. How does my credit card company calculate the amount of interest I owe?, Consumer Financial Protection Bureau. Checked October 2026.
5. I got a credit card promising no interest for a purchase if I pay in full within 12 months. How does this work?, Consumer Financial Protection Bureau. Checked October 2026.
6. 12 CFR 1026.7, Periodic statement, Legal Information Institute, Cornell Law School. Checked October 2026.
7. 12 CFR 1026.53, Allocation of payments, and the official interpretation of 1026.53, Legal Information Institute and Consumer Financial Protection Bureau. Checked October 2026.
8. 12 CFR 1026.54, Limitations on the imposition of finance charges, Legal Information Institute, Cornell Law School. Checked October 2026.
9. 12 CFR 1026.55, Limitations on increasing annual percentage rates, fees, and charges, Legal Information Institute, Cornell Law School. Checked October 2026.
10. When do late payments get reported?, Experian. Checked October 2026.