To understand what a periodic interest rate is, you must first understand the term "APR." The annual percentage rate (APR) is the cost of credit expressed as a yearly interest rate (e.g., 18%). For bill-paying purposes, an APR is divided into a periodic (e.g., monthly or daily) rate. For example, the monthly periodic rate for a credit card with an 18% APR is 1.5% (18% divided by 12). The periodic rate is then multiplied by the credit card balance to calculate the finance charge due.
We would like your feedback on this Personal Finance Frequently Asked Question.
