How is interest calculated at Petal?

At Petal, we know interest is complicated, so we try our best to be clear when it comes to how interest works. Read below to see when interest is charged, how interest is calculated, and how you can avoid paying interest. If you have any other questions, shoot us a message at support@petalcard.com. 

 

When is interest charged? 

With Petal, you will only be charged interest on new purchases if you carry a balance. That means, if you pay your statement balance in full by the due date each month, you won’t be charged interest on your new purchases. 

If you pay an amount less than your full statement balance — that is, you carry a balance — you’ll be charged interest on all new purchases starting on the date those purchases are made. Interest will continue to be charged until the billing cycle in which you pay your Statement Balance in full.  

For example, if your credit card Statement Balance is $1,000 and your choose to pay $1,000 by your statement due date, you’ll avoid being charged interest on new purchases.  

Instead, if you only pay $350 by the statement due date, you’ll be carrying a $650 balance. Since you’ll be carrying a balance, you’ll be charged interest on your next statement.

 

How is interest calculated?  

With Petal, interest is calculated using a method called Average Daily Balance (including new purchases). It can be pretty complicated, so we’ve done our best to break it down for you below. For the full detailed explanation, we recommend taking a look at your Cardholder Agreement.  

 

Step 1: Convert your Annual Period Rate (APR) to your Daily Periodic Rate (DPR) 

When you’re approved for a Petal card, you are given an APR that is used to determine how much interest you’re charged each year. Petal charges interest every day when you carry a balance, so the first step in calculating your interest charge is to calculate the rate you’ll be charged every day, which is your Daily Periodic Rate.  

To convert your Annual Percentage Rate to your Daily Periodic Rate (DPR), divide your APR by 365 (the number of days in a year). For example, if your APR is 23.4% and there are 365 days in the year, your DPR will be 0.0641%.

 

Step 2: Calculate your Average Daily Balance (ADB)

The ADB is calculated by totaling your balance for each day in the billing cycle and dividing that by the total number of days in the billing cycle. You can find the dates of your billing cycle on your statement. 

Your daily balance is calculated by totaling new purchases and payments made each day, and interest on your previous day’s daily balance.  

For the full breakdown, check out your Cardholder Agreement.

 

Step 3: Put it together 

The last step (finally!) is to calculate the amount of interest owed for each billing period by multiplying the Average Daily Balance (ADB) by the DPR and then multiplying that by the number of days in the billing period. For the visual learners out there, here’s a formula to help wrap your head around it: 

Interest charged = ADB X DPR X (# days in the billing period)

 

When will interest charges show up on my statement? 

You’ll see interest charges on the statement following the month you started carrying a balance and they’ll continue to appear until you pay your Statement Balance, in full, by the statement due date.  

You’ll be billed on the first day of each month for interest charged during the previous month. Interest charges are labeled on your statement as “interest charged.”

 

When is it due?  

Your payment is due on your due date, which is always at least 21 days after we give you your monthly statement.

 

How can I pay less interest? 

The only way to make sure you’re never charged any interest is to pay your full Statement Balance by the due date every month. However, if you carry a balance by spreading your payments over time, you’ll be charged less interest the sooner you pay off your balance.  

Here's an example: 

 

Billing cycle: July 1st to July 31st.

Payment is due: August 26th

Statement Balance: $500  

 

To avoid paying any interest, you’d need to pay the full Statement Balance of $500 by August 26th.

On the other hand, if you did not pay in-full by the previous due date (July 26th) and only pay $300 of the Statement Balance by August 26th, then you will be charged interest every day in August based on the total unpaid balance each day, which takes into consideration the previous day’s balance any new purchases and payments made that day (also known as your Daily Balance). You’d see the total interest charged during the month of August on your statement generated in September.  

If you paid your full Statement Balance by the previous due date (July 26th) and only pay $300 of the Statement Balance by August 26th, then interest will only be charged in August on new purchases and on the unpaid portion of your Statement Balance ($200).   

 

Long story short—the sooner you can pay off your balance, the less interest you’ll be charged!

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