How credit card interest is worked out from the APR, what paying only the minimum costs, and what changes when a 0% deal ends.
An APR is an effective annual rate, so the monthly rate is its twelfth root rather than a twelfth: 24.9% APR works out at 1.87% a month. On a £2,500 balance that is £46.75 in the first month. Paying £120 a month clears it in 27 months. The regulated minimum — interest plus 1% of the balance — starts at £71.75; the typical agreement worked through below starts at £72.22. Both fall as the balance falls — until a cash floor, where an agreement has one, takes over.
The balance you carry, the APR on the agreement, and what you actually pay each month.
The 24.9% APR is an effective annual rate, so the monthly rate is its twelfth root — 1.87% — not a twelfth. A twelfth overstates the charge, because the APR already contains the compounding.
The regulated minimum here is the month's interest plus the regulated share of the amount outstanding (CONC 6.7.5R) — the smallest minimum an issuer may lawfully set. A typical agreement's own minimum sits slightly higher and falls as the balance falls, which is what stretches a minimum-only payoff to decades; the page below works that path through.
Paying £120.00 a month clears the £2,500.00 in 27 months, with £697.42 of interest on the way.
This is arithmetic on the figures you enter, not debt advice. It assumes the rate and the payment both stay the same and that nothing further is borrowed, which is rarely how a real balance behaves. For free, regulated help, talk to MoneyHelper or StepChange.
| Tax/source year | 2026/27 |
|---|---|
| Region | England/Wales/Northern Ireland |
| Tax code basis | 1257L where the page uses PAYE defaults |
| Pension basis | No pension deduction unless this example says otherwise |
| Student loan basis | No student loan unless selected in this example |
| What is not decided here | PayBreakdown does not decide payroll correctness, lender approval, benefit entitlement or employer compliance, and does not give regulated financial, mortgage, debt, tax, payroll or legal advice. |
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Interest builds on the balance carried from day to day and is added once at the end of the statement period, after which it earns interest itself. A payment made early in the period therefore costs less than the same payment made late, and a purchase made early costs more.
The rate applied comes from the APR. A common shortcut takes the balance times the APR divided by 365 for each day, which overstates the charge, because an APR is already an effective annual rate that includes the effect of compounding and dividing it out again applies compounding twice. On £2,500 at 24.9% that shortcut gives £1.71 a day and £51.16 across a 30-day period, against £46.75 from the twelfth root. This page uses the twelfth root.
Divide the interest charged by the balance it was charged on and you have the monthly rate. Compound that over twelve months rather than multiplying it by twelve. £46.75 on £2,500 is 1.87% for the month, and 1.87% compounded twelve times is 24.9% a year.
Multiplying instead gives 22.44%, which is why a monthly rate printed on a statement, times twelve, lands below the APR quoted for the same card. The APR is the wider figure for a second reason as well: it takes in any annual fee, not only the interest. The Bank of England's Money and Credit release publishes the effective rate actually being charged across interest-bearing card balances.
A minimum payment is worked out from what is owed, so it falls as the balance falls and each one clears less of the principal than the one before. On a card agreement made on or after 1 April 2011, CONC 6.7.5R requires the minimum to be at least the interest, fees and charges applied that month plus 1% of the amount outstanding. On an older agreement no such floor applies, so a contractual minimum need not cover even the interest.
FCA rules also deal with a balance that is carried rather than repaid. Where, across a review period, more has gone on interest, fees and charges than has come off the balance, the provider has to make contact about it, and where the pattern continues it has to propose a way of clearing the balance over a reasonable period.
Take £2,500 at 24.9% APR. The first month's interest is £46.75, and every figure below follows from that same starting point.
Pay £120 a month and the balance clears in 27 months, costing £697.42 in interest for £3,197.42 paid in total.
Pay a minimum of that month's interest plus 1% of the statement balance, with a £5 cash minimum, and the first payment is £72.22. By month 12 it has fallen to £64.53 and by month 24 to £57.07. On those terms the balance takes 318 months, which is 26 years and 6 months. The £5 is an assumption about the agreement rather than anything set by rule, and it does most of the work: at a £25 cash minimum the same balance takes 160 months.
Hold that opening £72.22 steady instead of letting it fall, and the balance clears in 57 months for £1,562.94 of interest. The gap between 57 months and 318 is not the size of the payment. It is whether the payment is allowed to shrink.
A 0% period clears nothing by itself. On the day it ends the reverting rate applies to whatever is left, and where the deal charged a transfer fee that fee went on to the balance at the start, so the amount that reverts is larger than the amount that was moved. The balance divided by the months left in the promotion is the payment that finishes it inside the deal.
Purchases carry no interest where the statement is cleared in full by the due date. Cash withdrawals are usually handled differently: a separate cash rate above the purchase rate, interest running from the day of the withdrawal rather than from the statement date, and a handling fee charged at the time. Which of those a card applies is set by its agreement rather than by any rule, so the terms decide it.
Interest rate, term, fees, deposit and the credit commitments you already have all move the result, and a lender applies its own affordability policy and credit checks on top. Treat the number as a way to see whether a repayment looks comfortable or stretched, not as an offer — and read it against your real bills, savings and any income change you expect. See how each deduction is worked out.
Each day's closing balance, added up across the period. That is why the figure on a statement rarely equals the rate applied to either the opening or the closing amount, and why a balance cleared part-way through a period can still show interest on the next statement, covering the days before it was cleared.
Under the FCA rules covering most current card agreements, anything paid above the minimum is allocated to the balance charged at the highest rate first, which is normally a cash advance rather than purchases. Older agreements are not all covered, and where they are not, the order is whatever the agreement says.
No term is given, because the balance grows rather than falls. A number worked out from payments that never clear anything would be an artefact of where the projection stops rather than an answer, so the shortfall is reported instead.
No, and it errs in the same direction as the daily shortcut. A twelfth of 24.9% is 2.075% a month where the twelfth root is 1.87%. On a £2,500 balance that is £51.88 against £46.75 in the first month, so the shortcut overstates the charge by £5.13 before any compounding.
Last updated 2026-08-28. Checked by Sean Elsmore. Rates last checked against GOV.UK on 2026-08-07. Estimates are for planning and should be checked against official records where the decision matters.