Periodic Interest Rate
Determine exactly how much interest is accruing on your accounts each day or month. This tool simplifies annual rates into the smaller increments used by financial institutions.
What is a periodic interest rate?
A periodic interest rate is the interest rate charged on a loan or earned on an investment over a specific period, such as a day, month, or quarter. It is calculated by dividing the annual nominal rate by the number of periods in a year.
How do I calculate my daily periodic rate (DPR)?
To find your daily periodic rate, divide your Annual Percentage Rate (APR) by 365 (or 360, depending on the lender). For example, a 15% APR results in a daily rate of approximately 0.041%.
Why does the periodic rate matter for credit cards?
Credit card companies typically calculate interest daily. They apply the daily periodic rate to your average daily balance to determine the interest charges for that billing cycle.
Is the periodic rate the same as the effective rate?
No. The periodic rate is a simple division of the annual rate. The effective rate (EAR) accounts for the compounding of those periodic rates over an entire year.