Interest is calculated daily on the average balance owing; as your balance changes through the month, so does the amount of interest charged each day. Interest is then applied to the account on the statement date, forming part of your closing balance.
- For example say there are 31 days in the month. The balance for 10 days = $50.00 and the balance for 21 days = $300.00.
- The interest charged for 10 days would be calculated: ($50.00 X 25.50%) / 365 = $0.035 per day
- At 10 days the total interest would be calculated: 10 days x $0.035 = $0.35
- The interest charged for 21 days would be calculated: ($300.00 X 25.50%) / 365 = $0.210 per day
- At 21 days the total interest would be calculated: 21 days x $0.210 = $4.41
Therefore, total monthly interest would be calculated: $0.35 + $4.41 = $4.76.