Periodic Interest Rate Calculator

Periodic Interest Rate Calculator. Calculate the periodic interest rate for any compounding frequency. Enter your annual nominal rate, number of payments per year, and compounding periods per year — and get back the periodic rate per payment period along with the effective annual rate (EAR). Useful for loans, credit cards, mortgages, and investment accounts where interest compounds at a different frequency than payments. Also try the APY Calculator.

Results

Periodic Interest Rate (per payment period)

Periodic Rate (as decimal)

Effective Annual Rate (EAR)

Simple Periodic Rate (R/m)

Results Table

What is a periodic interest rate?

A periodic interest rate is the interest rate applied over a specific compounding period — such as a month, quarter, or day. It is derived from the annual nominal rate divided by the number of compounding periods. For example, a 12% annual rate compounded monthly gives a periodic rate of 1% per month. See also our Monthly Payment (Mid Rate) — Interest Rate Table Generator.

How do you calculate the periodic interest rate?

The basic formula is: Periodic Rate = Annual Nominal Rate / Compounding Periods per Year (R/m). When payments and compounding frequencies differ, the more precise formula is: r = (1 + i/m)^(m/n) − 1, where i is the nominal annual rate, m is compounding periods per year, and n is payment periods per year.

What is the difference between nominal rate and periodic rate?

The nominal rate (APR) is the stated annual interest rate without accounting for compounding within the year. The periodic rate is the share of that nominal rate applied each compounding period. They are equal only when compounding occurs once per year; otherwise the periodic rate is a fraction of the nominal rate.

Why is the periodic interest rate important?

The periodic rate is what actually determines how much interest accrues each period on a loan or investment. Lenders and banks use it to calculate monthly mortgage payments, credit card interest charges, and savings account growth. Understanding it helps you compare financial products on an apples-to-apples basis. You might also find our use the Rule of 72 Calculator useful.

Can the periodic rate be used to find the Effective Annual Rate (EAR)?

Yes. Once you know the periodic rate (r) and compounding periods per year (m), the EAR is: EAR = (1 + r)^m − 1. The EAR reflects the true annual cost of borrowing or the true annual yield on an investment after accounting for compounding.

How do banks use the periodic interest rate?

Banks apply the periodic rate to your outstanding balance each compounding period. For credit cards, this is typically daily; for mortgages, it is monthly. Even a small periodic rate compounds over time, which is why the effective annual rate is always higher than the nominal rate when compounding occurs more than once a year.

What happens when the payment frequency and compounding frequency are different?

When payments occur at a different frequency than compounding (e.g., monthly payments on a loan that compounds daily), you must use the adjusted formula r = (1 + i/m)^(m/n) − 1 rather than simply dividing the annual rate by the number of payments. This calculator handles both cases automatically.

What is an example of a periodic interest rate calculation?

Suppose your credit card charges 18% annually and compounds daily (365 times per year). The daily periodic rate is 18% / 365 ≈ 0.04932% per day. If you want the monthly periodic rate with monthly payments, you use (1 + 0.18/365)^(365/12) − 1 ≈ 1.4907% per month — slightly higher than the simple 1.5% due to daily compounding.