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What Is Accrued Interest on Credit Cards?

5 min read

Last Updated: January 29, 2026

Table of contents

Key Takeaways

For borrowers, interest is an extra expense for taking on debt.
Your annual percentage rate (APR) determines the amount of interest you’ll pay on your credit card.
You may avoid accrued interest if you pay off your credit card balance in full each month.

Credit cards may allow you to break up big expenses over time. But if you carry a credit card balance from one billing period into the next, you typically owe an additional interest payment as part of your unpaid balance. The longer you go without paying off your balance, the more interest may grow. Your accrued interest is the credit card interest that has built over time.

If your credit card account accrues a lot of interest, you may have trouble repaying your balance. Plus, interest charges may cut into the rewards you earn. Keeping interest charges low may help maximize rewards.

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Understanding accrued interest is important for managing your credit card debt.

How does accrued interest work?

If you have a credit card, loan, mortgage, or another type of debt, interest is the cost of borrowing money. The rate at which your balance accrues interest depends on the annual percentage rate (APR), which, for credit cards, is generally the same as an annual interest rate. To find your daily interest rate, divide your APR by 360 or 365 days depending on the card issuer.

You may find your credit card interest rates on your monthly credit card bill or your credit cardmember agreement. Interest rates may not be the same across all transactions. For example, a different APR may apply to regular purchases, balance transfers, and cash advances.

For credit cards, interest accrues each day. You may calculate your daily interest charges by multiplying your balance by your daily interest rate. Interest charges typically become part of your balance. So, you pay interest on the principal amount you charged plus any existing interest charges, depending on issuer terms.

How accrued interest works on savings or investment accounts

For savings and investments, accrued interest is money that you earn. The principal amount you put in a savings or investment account earns interest based on the annual interest rate, which may be fixed or variable.

While low interest is typically better for debt like credit cards or student loans, high interest rates may be ideal when it comes to saving and investment tools like certificates of deposit and bonds, for example. The higher your interest rate, the more your money may grow.

What factors impact accrued interest?

Annual percentage rate (APR): Paying interest on the money you borrow is how a company typically affords to loan money to you. A creditor, like a credit card company, will put this interest into a yearly rate called the annual percentage rate. If you carry a monthly balance on your credit card, you may face an interest charge based on your APR. A higher APR typically results in higher accrued interest on the unpaid balance.
Grace period: If you pay off your entire balance, many credit cards offer a grace period, when new charges don’t accrue interest. Your grace period is the time between the end of a billing period and the date your payment is due and can be 21 days or more. However, your grace period doesn’t apply if you already have an unpaid balance on your credit card. In that case, your credit card company will charge the daily rate on your balance.
Cardmember payment habits: If you always pay off your balance in full by the payment due date, you may not have to pay interest. However, if you make only the minimum payment, the interest may continue to build up on the unpaid balance.
Length of debt: The longer you keep an unpaid balance on your credit card, the more time interest has to build. An unpaid balance over a long period may lead to much higher debt because of the extra interest expense.

How to minimize accrued interest

You may save money and keep your credit card debt under control by taking steps to minimize your accrued interest charges.

Pay off your statement balance in full: If you only make the minimum monthly payment, you risk accruing interest on your unpaid balance. You may aim to pay off your statement balance by the due date every month. If you can’t, consider making an additional interest payment or paying more than the minimum.
Get a card with a lower interest rate: If you don’t typically pay off your card each month, you may consider shopping for a new card with a lower interest rate to use as your primary card.
Transfer your balance: If you have a large balance on a credit card with a high interest rate, consider transferring the balance to a card with a lower interest rate or an intro APR period. A credit card balance transfer offer may help you save on interest payments and pay off your debt.
Adjust your financial habits: Good financial planning may help you better manage your expenses and avoid accrued interest. Create a budget, monitor your expenses, and try to make a larger monthly payment even if you can’t pay off your statement balance in full. A debt repayment plan may help you keep your finances under control and reduce interest expenses.

Did you know?

A credit card with a low interest rate promotion for new borrowers may help you minimize your interest expense on an expensive purchase, as long as you pay the balance in full before the end of the introductory period.

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The bottom line

Understanding accrued interest may help you manage your finances. It’s important that you monitor your credit card statements regularly, review your interest rate, and make on-time credit card payments to minimize the impact of accrued interest. Good financial habits may help you take control of your credit card debt.

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