APR Calculator
Convert APR to monthly rate, total interest cost, and effective APY.
Effective APY (with monthly compounding)
25.57%
APR is the simple annual rate. APY (effective) is what you actually pay because interest compounds. APY > APR always.
👉 Compare common rates: credit card interest by APR — the cost of 12%, 18%, 24%, 30% and more on a $5,000 balance.
APR (annual percentage rate) is the yearly interest rate your card advertises. But it is a nominal rate: it does not include the effect of compounding, so the amount you actually pay over a year is a bit higher than the APR alone suggests.
This calculator breaks an APR down into the rates that matter day to day: the daily periodic rate, the monthly periodic rate, the interest on a given balance, and the effective APY once compounding is counted.
Understanding the difference between a stated APR and the effective rate helps you compare cards honestly and see why a 24% card costs you more than 24% if you carry a balance all year.
How this calculator works
To convert an APR, divide it two ways. The monthly periodic rate is APR / 12 (a 24% APR is 2% per month) and the daily periodic rate is APR / 365 (about 0.0658% per day). To get the effective annual rate, which accounts for compounding, use (1 + APR / 12)^12 - 1 for monthly compounding or (1 + APR / 365)^365 - 1 for daily. A 24% APR compounded monthly gives (1.02)^12 - 1 = about 26.82% effective, and compounded daily it is roughly 27.11%. So the true yearly cost sits above the sticker APR. To estimate interest on a balance, multiply the balance by the periodic rate for the period you want: $3,000 x (0.24 / 12) = $60 for one month.
What affects the number
- Nominal vs. effective: the stated APR ignores compounding; the effective APY, (1 + APR / n)^n - 1, is the real yearly rate you pay.
- Compounding frequency: daily compounding (n = 365) yields a slightly higher effective rate than monthly (n = 12) at the same APR.
- Purchase APR vs. other APRs: cash advances and penalty APRs are usually higher than the purchase APR and may compound with no grace period.
- Variable vs. fixed: most card APRs are variable, set as the prime rate plus a margin, so they change when the Fed moves rates.
- APR is not APY: banks quote APY on savings (what you earn) and APR on loans (what you owe); on a card carried all year, your effective cost resembles an APY.
- Introductory APRs: a 0% or low promo APR reverts to the standard (higher) APR once the promo period ends.
Frequently asked questions
How do I convert APR to a monthly interest rate?
Divide the APR by 12. A 21.99% APR becomes 21.99 / 12 = about 1.83% per month. Multiply that monthly rate by your balance to estimate one month of interest, though your issuer's exact figure uses daily compounding on your average daily balance.
What is the difference between APR and APY?
APR is the nominal annual rate with no compounding built in; APY (effective annual rate) includes compounding. For a credit card, if you carry a balance all year the compounding makes your true cost closer to the APY. A 24% APR works out to roughly 26.8% APY with monthly compounding.
Why is my effective rate higher than my APR?
Because interest compounds. Each period's interest is added to the balance, so later interest is charged on prior interest. Using (1 + APR / 12)^12 - 1, a 24% APR produces about a 26.82% effective annual rate rather than a flat 24%.
Is a lower APR always the better card?
For anyone who carries a balance, a lower APR directly lowers interest cost, so it matters a lot. If you pay in full every month, purchase interest is $0 and the APR barely matters, so rewards, fees, and benefits become the deciding factors instead.
This calculator provides general estimates for educational purposes only and is not financial advice. Your actual costs and credit outcomes depend on your specific card terms, issuer, and situation.