American credit cardholders carry, on average, about $6,000 in credit balances, but 40% of them don’t know the interest rate that they are paying on such a large balance, according to Bankrate. 

Ignorance is not bliss in this situation because credit card debt is an expensive liability to service. The national average credit annual percentage rate (APR) is 16.13%. Credit card interest rates can be north of 30% for poor credit scores.   

Household Credit Card Debt & More

For the third quarter of 2021, America’s aggregate debt balances stood at $15.24 trillion, including mortgages, student loan debt, credit card debt, and more.

• Total credit card as Q3 of 2021: $951.6 billion
• Average American credit card debt: $5,525
• Average APR:  16.13%

It will take a cardholder with the average credit card 281 months or 23-plus years to pay off his debt, and it will cost him $7,267 in interest.

How to Read and Calculate Your Credit Card Interest

When reviewing their credit card monthly statements, most cardholders don’t read past the payment information section, including their minimum payment due and due date.

Credit Card Interest Rates

Cardholders should review their credit card statement in its entirety to make sure that payments, credits, adjustments, and transactions are correct.  

Your current interest rates on purchases and cash advances are listed on your card monthly statement. As you can see on the above screenshot, the APR or purchases and cash advances are 12.99% and 22.99%, respectively.

At 12.99% APR, it will take you 271 months to pay off the debt, and it will cost you $5,507 in interest if you are a cardholder carrying the average American credit card debt of 5,525 dollars.  

Here’s a breakdown of your interest rate:

• Yearly interest cost-5525*0.1299=$717.70
• Monthly interest cost (5525*0.1299)/12=$59.81
• Daily interest cost(5525*0.1299/365= $1.97

Your interest cost and payoff date will increase if you continue using the credit card and make additional charges.  

Credit card issuers charge interest to your account each day based on the average daily balance, also known as daily compound interest.

Conclusion 

Credit card debt is one of the most expensive debts to service, with the average APR standing at 16.13%. Cardholders who don’t know their credit card interest rate are hurting themselves financially.