How do you work out APR from monthly interest rate?

Ali25

I am trying to use the snowball debt calculator but can't work out how to calculate the APR for my one of my cards, as it only gives me the monthly interest rate. Any ideas? Thank you.

Also, what does EAR mean? Sorry I must sound a bit dim!

YorkshireBoy

Ali25 wrote: »

I am trying to use the snowball debt calculator but can't work out how to calculate the APR for my one of my cards, as it only gives me the monthly interest rate. Any ideas? Thank you.

This calculator will do it for you:

http://www.stoozing.com/mon2yr.htm

Also, what does EAR mean?

EAR stands for Effective Annual Rate.

It's used to express the cost of borrowing on current accounts. The EAR takes account of the rate of interest charged, the frequency it is levied to accounts and compounding of interest. It does not include overdraft fees and is variable.

Definition courtesy of Yorkshire Bank

taless

Hi Ali25,

Let's say your Monthly interest rate is given as 1.456%.

This means one month later your balance will be 101.456% of your current balance (assuming no payments into/out of the card).

101.456% = 1.01456

1.01456 to the power of 12 = 1.189413409

From the 1.189413409, subtract 1 out of it, it becomes 0.189413409

Multiply it by 100, it becomes 18.9413409, taking it to 1 decimal place it will be 18.9.

There you go! A EAR of 18.9%.

dipsy

hi just a quick question, used the calculator to work out the APR from the monthly interest on a 6.9% APR Life of balance transfer and it came out at 6.95 %, should I query this with MBNA I know its only 0.05% .... what do you think?

cheers

NickX

dipsy wrote: »

used the calculator to work out the APR from the monthly interest on a 6.9% APR Life of balance transfer and it came out at 6.95 %, should I query this with MBNA I know its only 0.05% .... what do you think?

No, this is normal. They appear to be able to round the APR down to 1 decimal place. They all do it, so I suspect it is legal.

At least you accurately checked your APR :beer: