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Understanding credit card interest
Using a credit card can be helpful, but it’s important to understand how interest works—so you don’t end up paying more than you expected. Simply put, credit card interest is the cost of borrowing money. If you don’t pay your full balance by the due date, interest is added to what you owe.
Let’s break it down together.
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Types of credit card interest
Not all interest is the same. Here are the main types you might come across:
- Purchase interest
This is charged when you buy something and don’t pay off the full amount. It’s the most common type.
- Balance transfer interest
If you move a balance from one card to another, this is the rate that applies. It’s often different from the purchase rate.
- Cash advance interest
Taking out cash with your credit card? Interest starts right away—and it’s usually higher than other types.
- Promotional interest
Some cards offer low or 0% interest for a limited time. These deals can be great, but make sure you know when the promo ends—because the regular rate will kick in after that.
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How is interest calculated?
Interest might seem confusing, but it’s based on a simple formula. It’s calculated daily and added to your balance each month.
Here’s how it works:
Example:
If your APR is 16%, your daily rate is about 0.000438
On a €1,000 balance, that’s around €0.44 per day
Over 30 days, that adds up to about €13.20 in interest
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How to avoid paying interest
Good news—you can avoid interest altogether with a few smart habits:
- Pay your full balance by the due date each month
- Avoid cash advances unless it’s an emergency
- Pay more than the minimum to reduce your balance faster
- Keep track of promotional rates so you’re not caught off guard when they end.
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Need help with credit card debt?
If you’re feeling overwhelmed, you’re not alone—and you don’t have to face it by yourself. Many banks, including Bank of Ireland, offer support to help you manage your repayments. The sooner you reach out, the more options you’ll have. You can check out our money worries hub for help.
The information prepared above by Bank of Ireland “BOI” is for information purposes only and does not constitute financial or tax advice. You should seek assistance from a professional if you require financial or tax advice. No liability is accepted by BOI for any errors or for any loss to any person in reliance on this information. BOI believes any information to be correct at 19/08/2025 the time of publishing and the information is subject to change without notice. BOI does not make any representations or warranties in respect of the accuracy of this information and is not responsible for the content of external sites. Please refer to our Terms & Conditions for the use of the Bank of Ireland Group Website for further details.
Bank of Ireland is regulated by the Central Bank of Ireland.