How Credit Card Interest Works (The Math)

Credit card interest is designed to be confusing. Here’s how it actually works.

The Minimum Payment Trap

Minimum payments are typically 1-3% of balance or $25, whichever is higher.

$5,000 at 24% APR, paying minimum:

• Time to payoff: 17+ years
• Total interest paid: $6,000+
• Total paid: $11,000+ (more than double)

The Grace Period

If you paid last month’s balance in full, you have ~21-25 days after your statement to pay without interest. This is the grace period.

If you carried a balance, you lose the grace period—new purchases start accruing interest immediately.

Last updated: January 2026 Affiliate disclosure: ShortcutBest may earn a commission when you apply through our links.