The daily periodic rate is how a yearly APR becomes the rate a card issuer actually charges. The CFPB explains that issuers divide the APR by either 360 or 365, depending on the issuer, and multiply that rate by the amount owed at the end of each day. When each day's interest is added to the next day's balance, interest compounds daily. A card with several balances (purchases, cash advances, balance transfers) has a separate daily rate for each APR.
Formula
DPR = APR ÷ 365 (or APR ÷ 360)
Interest for a cycle ≈ average daily balance × DPR × days in cycle
- APR is the annual percentage rate as a decimal.
- Average daily balance is the sum of each day's balance divided by the number of days in the billing cycle.
Example
A card with a 24% APR has a DPR of 0.24 ÷ 365 = 0.000658, or 0.0658% per day. An average daily balance of $5,000 over a 30-day cycle costs 5,000 × 0.000658 × 30 = $98.63 of interest. With a 360-day divisor the DPR is 0.0667% and the same cycle costs $100.00.
Common mistakes
- Treating APR ÷ 12 as the charge. It is a good monthly estimate, but issuers charge by the day, so a 31-day cycle costs more than a 28-day one.
- Forgetting the grace period. A DPR only applies to balances that are charged interest; paying the statement balance in full by the due date usually means purchases are not charged interest at all.
The guide to how credit card interest is calculated works through a full billing cycle, and the credit card payoff calculator shows what the rate costs over time.