What is the daily periodic rate & how do you calculate it?
The Daily Periodic Rate (DPR) on your credit card could help you figure out how much interest you are paying on your balance each day. Although credit card companies usually calculate your interest charges using an Annual Percentage Rate (APR), it is not uncommon to see daily periodic rate charges broken down on your monthly statement.
Understanding the daily periodic rate on your credit card could help you understand more about how compounded interest charges affect your daily average balance. Keeping these charges in mind, you may be able to pinpoint which credit cards are costing you the most in compounded interest. You'll also find out how much money it is costing you each day to borrow from your current credit card issuer.
Below, you'll find some information on why it may be useful to calculate the daily periodic rate of your credit card. Additionally, you'll also learn how to do so in three simple steps in the event that this information is not calculated for you on your monthly statement.
What is daily periodic rate?
A daily periodic rate defines the amount of interest you are paying on your credit card balance at the end of each day. Each credit card has a different APR or DPR and these rates could vary between issuers due to many factors. Each day's interest charges are added together to determine the total amount for each billing cycle. This interest rate can also be stated as an annual rate on your credit card statements.
Why should I calculate my daily periodic rate?
Figuring out how your daily interest is being calculated on a credit card could help you pinpoint which credit cards you should prioritize paying down first. It may be quite eye-opening to find out that you are paying a rather high daily rate on a credit card balance that you have not paid off yet. These calculations could also help you understand whether it is worth putting certain purchases on that specific credit card as well as how much your credit card balance is growing and costing you at the end of each day.
How do I calculate my daily periodic rate?
Your daily periodic interest can be calculated by dividing your Annual Percentage Rate (APR) by the number of days that are taken into account for the year, this is typically 360 or 365 days depending on your credit card issuer. You can calculate your daily period rate in three steps as follows:
- Confirm the current APR rate on your credit card: Look at your monthly statements to find your current Annual Percentage Rate.
- Divide this percentage by 365: Once you have found the APR, divide it by 365 (the number of days in a year) to find out your daily periodic rate. Take for example a credit card with an APR of 23.99%. Using the above calculation, the calculated DPR would be .0657%.
- Calculate your average daily balance: Many credit card issuers will use the average daily balance to calculate your monthly finance charge for a given billing cycle. Using this method, your credit card balance is averaged over the entire billing cycle. This numerical average is then multiplied by the daily periodic rate and then by the number of days in the billing cycle.
