Monthly Periodic Rate

Credit card companies and their customers have a symbiotic relationship. Rather than having to wait to have enough cash to buy those cute new shoes or go on that luxury vacation, the cardholder charges the purchase. In return, the credit card companies make a profit when they add interest to the original amount borrowed.

The amount of interest charged in each billing period (about 30 days) is based on the monthly periodic rate. The monthly periodic rate is 1/12 of the yearly interest rate multiplied by the amount that is owed on the account as averaged on a daily basis. This interest charge is then added to the balance and determines the minimum payment for the month.

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