# How to calculate interest gained by paying off credit card right before the due date and not earlier?

By not paying off the credit card statement amount right after it is generated but closer to the due date, the same funds can be in a savings account generating interest. I'd like to know precisely how much, given

• x annual interest rate in the savings account
• y the credit card bill to be paid.
• z the number of days before the due date the payment is made.

I suspect it's very low amounts.

• What country are you in? Commented Apr 23, 2016 at 2:43

It looks like you're looking for a method of calculating interest earned in a savings account for a specified number of days.

Interest in savings accounts are typically compounded daily. You can get pretty close with 1/360th of your interest rate times the number of days times the amount of money.

To get closer you do (using the variables you specified)

``````( y * ( 1 + ( x/100/360 ) ) ^z ) - y
``````

If you are paying the statement in it's entirety, and you were not carrying a balance in to the prior statement, there will be no interest charge if you pay on the due date.

Generally, interest is calculated monthly based on your average daily balance (total balance each day divided by number of days in the billing period). If you pay your balance in full each month there won't be an interest charge. You accrue your charges through the statement period. You are then given until the statement due date to pay the balance off. If you carry a balance past that due date you will begin to accrue interest. What's worse, if you carried a balance through the due date, you will begin accruing interest on your new charges as well.

The best possible first step to debt reduction is to stop spending on any card with a balance because any new charges will begin to accrue interest immediately.

Interest rate divided by 360 will typically get you pretty close to a daily interest amount.

I personally never pay before the due date.

• OP is not asking about credit card interest, but rather about the amount of extra interest earned by leaving the money in a savings account for the 3-7 weeks between the charge event and the end of the grace period for the billing period in which that event fell (versus, I suppose, paying off the charge event immediately).
– dg99
Commented Apr 22, 2016 at 19:02
• To substitute some numbers in - if your savings account gets 1.2% (because the maths are easy), then that's 0.003%/day. If you carry the balance for an average of 30 days before due date, you'd get 0.1% interest on it. So by holding a charge of say \$500 until the last minute, you earn fifty cents. Commented Apr 22, 2016 at 20:22

Here's an easy way to think about it. \$1000 at 1% interest is \$10.00 or close to 3 cents per day. (It's really about 10% less, since there aren't just 333 days in a year). In the US, rates are more like .1%, so it would take \$10,000 to get you that 3 cents per day. Hardly worth bothering. I changed from paying on the due date, to just paying as soon as the bill comes in. The lost pennies are a small price to pay for a clean desktop.