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How to pay less interest

Learn how to pay off your credit card debt

Read about ways to lower your interest payments and shrink your debt.

Questions about calculating credit card interest and payoff dates

Typically, the minimum payment is a percentage of your total current balance, plus any interest you owe. So if you owe $2,000, your minimum payment might be $40. There is usually a dollar amount for your minimum monthly payment also, so it may be expressed as something like, "$35 or 2% of your balance plus fees, whichever is greater." Each credit card issuer calculates your minimum monthly payment differently. Consult your Discover statement and the terms of your account for information on how your Discover card minimum monthly payment is calculated.

First take your APR (Annual Percentage Rate) and divide it by 365 (the days in the year) to get your daily interest rate. (Note that there may be different APRs that apply to different transactions on the same bill.) Every day, your credit card issuer will multiply the daily interest rate for each transaction that hasn’t been paid off by the dollar amount of the transaction. That’s how much interest you’ll be charged for that day. This interest gets compounded, which means it’s added to what you owe. Each day, you’ll have a new daily balance, and the credit card issuer will calculate the interest on this amount. The daily interest charges are all added up to determine your monthly interest payment, which keeps compounding until you pay your bill in full.

In order to calculator your payoff date, you’ll need to figure out  how much your balance is each day by adding transactions plus interest, add up all your daily balances to get your monthly balance, subtract the payments you will be making, then calculate your new daily balances for each day until your bill becomes 0, then count how many days that took. As this math can be quite complicated, it’s much easier to use the Discover credit card interest calculator.

Given your interest rate and your monthly payment amount, the same calculator can tell you how much interest you'll pay each month, and how long it will take to pay off your balance.

Even if you can’t pay off your balance in full, it can be helpful to pay more than the minimum payment to work towards being debt-free. To do this, we recommend coming up with a budget plan (and sticking with it) so you can better understand how you’re spending your money, and how you can cut costs. Even an extra $5 or $10 a month can help you pay less in interest, and may make more of an impact than you might think.

While carrying a balance doesn’t affect your credit score, your credit utilization does. This is how much of your available credit you’re using. A high utilization could be seen as a high risk for potential lenders, while a low utilization shows them you’re able to pay off your balances in a timely manner. Keep in mind, credit utilization typically makes up almost a third of how your credit score is calculated.

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