To calculate a daily interest rate, divide the annual percentage rate (APR) by 365: this is the daily periodic rate. Then multiply it by your balance to get one day's interest. On a $5,000 balance at 22.99% APR, the daily rate is 0.062986% and daily interest is about $3.15.
Key takeaways
- Daily periodic rate (DPR) = APR / 365. Some card issuers use 360 instead, which makes the daily rate slightly higher.
- Daily interest = balance x DPR. Multiply by the number of days to get interest for a period.
- Credit cards apply the DPR to your balance every day and add it back, so interest compounds daily.
- APR is the simple annual rate. APY includes compounding and is always equal to or higher than the APR it comes from.
- APY = (1 + APR / n)^n - 1, where n is the number of compounding periods per year.
The core formula
Two steps convert an annual rate into a real daily dollar amount.
-
Find the daily periodic rate. Divide the APR by the number of days the issuer uses in a year, almost always 365.
Daily periodic rate = APR / 365 -
Apply it to your balance. Multiply the DPR by the balance you are carrying that day.
Daily interest = Balance x Daily periodic rate
The Consumer Financial Protection Bureau defines the daily periodic rate as the rate used to calculate interest by multiplying it by the amount owed at the end of each day. That daily amount is added to the balance, which is why credit card interest compounds day after day rather than sitting still until your statement closes.
The 365 vs 360 wrinkle
Most issuers divide the APR by 365 (366 in a leap year). Some divide by 360, a convention left over from older banking math. Dividing by the smaller number produces a slightly larger daily rate, so the 360 method costs you a bit more. The gap is small per day but real over a full year.
| Method | DPR on 22.99% APR | Daily interest on $5,000 |
|---|---|---|
| APR / 365 | 0.062986% | $3.15 |
| APR / 360 | 0.063861% | $3.19 |
Your cardholder agreement states which divisor applies. If you want to trace exactly how a card turns a rate into a charge, see how the balance subject to interest rate is determined first, because that balance is what the daily rate multiplies.
Worked example: credit card
Say you carry a $5,000 balance at a 22.99% APR.
- DPR = 22.99% / 365 = 0.062986%
- Daily interest = $5,000 x 0.00062986 = $3.15
Over a 30-day billing cycle, a flat $5,000 balance accrues roughly $94.48 in simple daily interest (30 x $3.15). Because the interest is added back each day and then earns interest itself, the compounded figure is a little higher, about $95.35 across the same 30 days.
| Item | Value |
|---|---|
| Balance | $5,000 |
| APR | 22.99% |
| Daily periodic rate | 0.062986% |
| Interest per day | $3.15 |
| 30 days, simple | $94.48 |
| 30 days, compounded daily | $95.35 |
This is why paying down a card balance mid-cycle helps: the daily rate hits a smaller number every day after your payment posts.
Worked example: savings account
Daily interest works in your favor on deposits. Many banks accrue interest daily and credit it monthly. Take $10,000 in an account paying a 4.00% nominal annual rate, compounded daily.
- DPR = 4.00% / 365 = 0.010959%
- Daily interest = $10,000 x 0.00010959 = $1.10
Held for a full year with daily compounding, that account earns $408.08 rather than the $400.00 that simple interest would produce. The extra $8.08 is compounding at work. For context on where deposit rates have sat over time, the average savings account interest rate history shows how far current yields sit above the long run norm.
| Item | Value |
|---|---|
| Balance | $10,000 |
| Nominal annual rate | 4.00% |
| Daily periodic rate | 0.010959% |
| Interest per day | $1.10 |
| One year, simple | $400.00 |
| One year, compounded daily | $408.08 |
APR vs APY
APR is the plain annual rate before compounding. APY (annual percentage yield) folds compounding in, so it reflects what you actually earn or owe across a year. The more often interest compounds, the wider the gap.
APY = (1 + APR / n)^n - 1
Here n is the number of compounding periods per year. The same 6% APR produces different yields depending on how often it compounds.
| Compounding frequency | n | APY on 6% APR |
|---|---|---|
| Annually | 1 | 6.0000% |
| Monthly | 12 | 6.1678% |
| Daily | 365 | 6.1831% |
Banks advertise savings in APY because it looks higher, while lenders often quote APR because it looks lower. When you compare two accounts or two loans, make sure you are comparing the same measure. A deeper walkthrough of how these rates are set and quoted lives in the interest rates hub, and the mechanics of how banks apply them sit inside the banking and credit hub.
The bottom line
The daily interest rate is just the APR sliced into 365 pieces, and the daily interest is that slice times your balance. Get those two numbers right and you can check any lender's math, see the true cost of carrying a card balance, and judge whether a savings yield is worth chasing. Confirm the divisor in your agreement, watch for the APR versus APY switch, and the rest is arithmetic.
Frequently asked questions
How do you calculate a daily interest rate from an APR?
To calculate a daily interest rate, divide the APR by 365 to get the daily periodic rate, then multiply it by your balance for one day's interest. On a $5,000 balance at 22.99% APR, the daily rate is 0.062986% and daily interest is about $3.15. Multiply by the number of days to get interest for a longer period.
Why do some credit cards divide the APR by 360 instead of 365?
Some issuers divide the APR by 360 as a convention left over from older banking math, while most use 365 or 366 in a leap year. Dividing by the smaller 360 produces a slightly larger daily rate, so it costs you a bit more. On a 22.99% APR the daily rate is 0.063861% versus 0.062986%. Your cardholder agreement states which divisor applies.
What is the difference between APR and APY?
APR is the plain annual rate before compounding, while APY, the annual percentage yield, folds compounding in and reflects what you actually earn or owe across a year. APY is always equal to or higher than the APR it comes from, and the more often interest compounds the wider the gap. The formula is APY = (1 + APR / n)^n - 1, where n is compounding periods per year.
Why does paying down a credit card mid-cycle help?
Paying down a card balance mid-cycle helps because the daily periodic rate hits a smaller number every day after your payment posts. Credit cards apply the daily rate to your balance every day and add the interest back, so interest compounds daily. On a flat $5,000 balance at 22.99% APR, a 30-day cycle accrues roughly $95.35 compounded, and a lower balance shrinks that daily charge.