Daily Periodic Rate
Daily Periodic Rate is the interest rate a lender applies to a credit card balance each day, calculated by dividing the card’s annual percentage rate (APR) by 365. This is evaluated within APR, Interest & Fees.
Plain-Language Meaning
The daily periodic rate is the percentage of interest charged on a credit card balance for a single day. It is derived from the annual rate, making it possible for lenders to calculate interest charges on a daily basis.
Practical Example
If your credit card has an APR of 18%, the daily periodic rate would be 0.0493%. This means that each day, the lender multiplies your balance by this rate to determine how much interest accrues.
What It Does Not Mean
This term does not refer to the total amount of interest you pay in a month or year, nor does it represent a fee or penalty. It is simply the rate used to calculate daily interest charges.
How It’s Calculated
The daily periodic rate is calculated by dividing the annual percentage rate (APR) by 365. The system then multiplies this rate by the balance each day to determine the daily interest charge, which can compound if the balance is not paid in full.
Common Misconceptions
- “The daily periodic rate is the same as the APR.” The daily periodic rate is a fraction of the APR, not the full annual rate.
- “Interest is only charged monthly, so the daily rate doesn’t matter.” Interest can accrue daily, making the daily periodic rate important for understanding how charges add up.
- “The daily periodic rate includes fees and penalties.” The daily periodic rate applies only to interest, not to other charges.
Related Pages
Related Glossary Terms
FAQ
- How do I find my daily periodic rate? The daily periodic rate is typically listed in your credit card agreement or statement, or it can be calculated by dividing your APR by 365.
- Does the daily periodic rate change if my APR changes? Yes, if your APR changes, the daily periodic rate will also change because it is directly based on the APR.