Daily Interest Rate Calculator
Daily Interest Rate Calculator
Some financial calculations — credit card interest, per-diem penalties, prorated fees — need a daily rate rather than an annual one. There are two valid ways to derive it: simply dividing the annual rate by 365, or finding the true compound daily rate that, applied 365 times, exactly reproduces the annual rate.
Lenders and billing systems often use the simple daily rate for calculating per-day interest charges on outstanding balances, since it's easier to compute and explain, even though it's a very close approximation rather than the mathematically "pure" compound daily rate.
- Simple Daily Rate: Annual rate ÷ 365 — the most common method used in everyday billing and interest accrual.
- Effective (Compound) Daily Rate: The rate that, compounded 365 times, exactly equals the annual rate — very slightly lower than the simple rate.
- Used for Per-Diem Calculations: Common in credit card interest, late fees, and prorated billing.
Which daily rate should I use?
Most credit cards and billing systems use the simple daily rate (annual ÷ 365) for calculating daily interest charges — check your specific account terms, but this is the most common convention.
Why are the two daily rates slightly different?
The simple rate assumes no compounding within the day-to-day calculation; the effective rate accounts for the fact that daily compounding needs a slightly smaller daily rate to reach the same annual total.
Daily Interest Rate Calculator
Some financial calculations — credit card interest, per-diem penalties, prorated fees — need a daily rate rather than an annual one. There are two valid ways to derive it: simply dividing the annual rate by 365, or finding the true compound daily rate that, applied 365 times, exactly reproduces the annual rate.
Lenders and billing systems often use the simple daily rate for calculating per-day interest charges on outstanding balances, since it's easier to compute and explain, even though it's a very close approximation rather than the mathematically "pure" compound daily rate.
- Simple Daily Rate: Annual rate ÷ 365 — the most common method used in everyday billing and interest accrual.
- Effective (Compound) Daily Rate: The rate that, compounded 365 times, exactly equals the annual rate — very slightly lower than the simple rate.
- Used for Per-Diem Calculations: Common in credit card interest, late fees, and prorated billing.
Which daily rate should I use?
Most credit cards and billing systems use the simple daily rate (annual ÷ 365) for calculating daily interest charges — check your specific account terms, but this is the most common convention.
Why are the two daily rates slightly different?
The simple rate assumes no compounding within the day-to-day calculation; the effective rate accounts for the fact that daily compounding needs a slightly smaller daily rate to reach the same annual total.