Effective Interest Rate Calculator
Calculate the Effective Annual Rate (EAR) for any nominal rate and compounding frequency.
Read the GuideBefore you calculate
Converts a nominal rate using the selected compounding frequency. Fees are excluded, so the result is not a fee-inclusive borrowing APR.
Compound Interest & the EAR Formula
When 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 yearExample Scenarios
Monthly vs. Annual Compounding
A 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 Card Daily Compounding
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%.
Methodology & Assumptions
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.
Sources & calculation notes
Maintained by MoneyCalc. Results are estimates based on the inputs and assumptions shown, not personalized financial advice or a lender quote. Default rates are examples unless a specific tax year or official table is identified.
References explain the underlying concepts or rules. They do not endorse or independently certify this implementation.
Calculations run in your browser. Some tools retain settings on this device. Displayed rounding can produce small differences from a statement or contract.