Credit Card Interest Rate: How To Calculate Credit Card Annual Percentage Rate (APR)?

Denise Bay

Denise Bay

Last updated 28 February, 2022

Curious how credit card interest is calculated? Here’s the credit card interest rate and annual percentage rate (APR), explained.

Credit cards can be a boon or a bane depending on how you use and manage them. For starters, every credit cardmember should know that these convenient little pieces of plastic have high interest rates. And if one isn't careful, there’s always that risk of spiralling into credit card debt

It’s not all doom and gloom, though. Find out how credit card interest rates work, how you can use credit cards without having to pay interest, how often credit card interest compounds, and how to calculate credit card interest charges. The last bit there is rather interesting, I promise. 

What does credit card APR mean?

When it comes to credit cards, the interest rates are usually stated as yearly rates. This is called the annual percentage rate (APR). 

So, if your credit card has a purchase APR of 26.9% p.a., this interest rate will be charged on your balance if you don’t make the full payment before the due date. 

Here’s an example: 

You have a statement balance of S$500 but you’ve only managed to pay S$100. Your outstanding balance of S$400 will incur interest charges at a rate of 26.9% p.a., compounded daily.

How does APR work on credit cards?

Fun fact: your credit cards have different types of APR! 

Purchase APR or Retail APR: This APR applies to purchases made using your credit card. It is the most common of the different interest rates, and the one most people are aware of. However, so long as you pay your credit card bill in full before the due date, your purchase interest rate is irrelevant — you will not be charged any interest at all. 

Balance Transfer APR: This APR is charged when you transfer a balance to your credit card. Don’t be surprised if the balance transfer APR is higher than the purchase APR. 

Cash Advance APR: This APR is charged when you make a cash advance withdrawal from your credit card. The Cash Advance APR is typically higher than the purchase APR and Balance Transfer APR. However, note that interest starts accruing the day you make the advance cash withdrawal. 

How often does credit card interest compound?

The hard truth that everybody needs to know? Credit cards compound interest daily, although credit card issuers often refer to the card’s APR. 

Suppose you're unable to clear your credit card bill fully by the due date. In that case, interest will be charged daily for the outstanding amount owed, including the principal balance and existing interest charges (if any). 

Why is that so? Well, any unpaid amount on your current credit card bill will be rolled over to the next bill and charged interest on top of that. 

This is precisely why credit card debt tends to snowball quicker than in a blink of an eye. The longer you owe the bank, the more interest you’ll have to fork out ultimately. 

How to calculate APR on a credit card?

While it isn’t the easiest to calculate how much interest you’ll be paying on the balance rolled over on your credit card, it can be done with some determination and number-crunching skills. 

Here are the three steps to follow: 

1. Convert your APR to a daily rate

2. Find your average daily balance

3. Calculate your interest charges

#1 Convert your APR to a daily rate

Most credit card issuers compound interest daily.

Therefore, interest incurred is added to your principal (think: original) balance at the end of each day. You’d want to give your cardmember agreement a thorough look to check if interest is indeed compounded daily. 

Assume your credit card has a 26.9% APR. To convert this into a daily rate, divide 26.9% by 365 days. Note that you’ll first have to convert the percent to a decimal. 

Here’s the math: ((APR/100)/365) = ((26.9/100)/365) = 0.00073699 

Your daily rate would be 0.00073699.

#2 Find your average daily balance

The second step is the most tedious as you’ll need to know what your balance was every day during the billing cycle. If your billing cycle is 25 days long, you’ll need to determine your exact balance for all 25 days. 

You’ll also need to account for remaining balances from the prior billing cycle (if any), plus new payments made during your current billing cycle.

1/3/22S$2,500 purchaseS$2,500
2/3/22S$300 purchaseS$2,800
7/3/22S$500 purchaseS$3,300
13/3/22S$200 purchaseS$3,500
19/3/22S$2,100 purchaseS$5,600
24/3/22S$50 purchaseS$5,650

You’ll need to add the balances from every day in the 25-day billing cycle and divide by the length of your billing cycle (in our scenario, 25 days).

Here’s the math: (S$2,500 + S$2,800 + S$2,800…+S$5,650)/25 = (S$96,600)/25 = S$3,864 

Your average daily balance would be S$3,864.

Note: If you had a balance from the prior billing cycle, you’d include that in the addition part of your balance calculation. And if you made any payments during your current billing cycle, be sure to minus them when you add up your current balances!

#3 Calculate your interest charges

Now that you have found both your average daily balance and daily rate, you’re ready to calculate your interest charges. 

This can be done simply by multiplying your average daily balance by the daily rate, then multiplying that amount by the number of days in your billing cycle.

Here’s the math: (S$3,864 x 0.00073699) x 25 = S$71.19

The result would be a S$71.19 interest charge during that billing cycle.

Back to top

Is 25% APR high?

A purchase or retail APR of 25% p.a. is pretty standard in Singapore. In fact, amongst credit cards issued in Singapore, 25% p.a. is on the lower side. 

Case in point, DBS/POSB credit cards have a prevailing interest rate of 26.80% p.a. (subject to compounding if the charges are not repaid in full on the transaction amount, chargeable daily from the date of transaction until receipt of full payment. 

Their cash advance APR is set at 28% p.a. (subject to compounding if the charges are not repaid in full on the amount withdrawn, chargeable daily from the date of withdrawal until receipt of full payment. 

Citi credit cards have a prevailing interest rate of 26.9% p.a. for retail and cash advance transactions. However, if your account is in good standing and the bank is pleased with how you have managed your account thus far, the bank may extend the promotional retail and cash advance interest rates of 20.9% p.a. to you! 

The reverse is, of course, true. Citi has no qualms about raising your retail and cash advance interest rates of 29.9% p.a. if your account is past due.

Here’s another example. The American Express True Cashback Card has a prevailing interest rate of 26.90% p.a. for purchases, compounded if payment of the closing balance in your statements is not made in full or 29.99% p.a. in the event that your account has three or more defaults that remain unpaid for two or more consecutive months in the last 12 months. 

Its cash advance APR is also 26.90% p.a., compounded daily from the date of withdrawal amount and the relevant fees are paid in full.  

Back to top

Compound interest calculator singapore

As much as compound interest can help grow your wealth over time if you save and invest diligently, it can also land you in mounting debt if you ignore how you manage your credit card expenses and bills.   

Consider using this debt calculator and credit card interest calculator to estimate your monthly repayments as well as the duration needed to clear your debt.

Do credit cards have a place in your life?

Well, yes. Credit cards can be very valuable if you use them right

To maximise all the benefits that credit cards offer, ensure you don’t carry balances over to the following month! This means you have to pay off all of your credit card bills in full before their due dates. Curious to know the simplest way to do that? Just GIRO your bills!

Read these next:
How To Get A Little Richer With The Magic Of Compound Interest
4 Ways to Pay Off Credit Card Debt in Singapore
What Really Happens If You Skip Credit Card Bills, Loan & BNPL Payments
Balance Transfer: How Does It Work And Should You Get One?
3 Reasons To Cancel Your Credit Card (And How To Do Just That)

While Denise has a thing for travel, K-dramas, 0% sugar bbt (with boba!), Japanese cuisine and flat white, her curious nature means all sorts of random tabs are open on her phone 24/7. She doesn’t like to pay full price for anything, too.


Use a personal loan to consolidate your outstanding debt at a lower interest rate!

Sign up for our newsletter for financial tips, tricks and exclusive information that can be personalised to your preferences!