Effective Interest Rate Calculator
Calculate the Effective Annual Rate (EAR) for any nominal rate and compounding frequency.
Read the Guide
Calculate the Effective Annual Rate (EAR) for any nominal rate and compounding frequency.
Read the GuideWhen interest compounds more than once per year, the actual annual return exceeds the nominal rate. The Effective Annual Rate (EAR) captures this by accounting for how many times per year interest is added to the principal. Banks often advertise nominal rates while savings accounts earn the higher EAR.
EAR = (1 + r/n)^n − 1 | where r = nominal rate (decimal), n = compounding periods per yearA 10% nominal rate compounded monthly yields an EAR of 10.47%. On a $10,000 deposit held for a year, that's an extra $47 compared to annual compounding — and the gap grows significantly over longer horizons.
Credit cards often compound daily. A 20% nominal APR compounded daily becomes a 22.13% EAR. This is why carrying a balance is so costly — you're effectively paying 22%+ annually, not 20%.
EAR is computed as (1 + nominalRate / compoundingFrequency)^compoundingFrequency − 1. The chart shows EAR values calculated inline for annual (n=1), quarterly (n=4), monthly (n=12), and daily (n=365) compounding at the entered nominal rate.