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Step 1
Look at the back of your credit card statement. The APR should be listed, as well as how the rate is calculated. Determine if your financial institution uses a monthly periodic rate or a daily periodic rate. This information should be stated after the APR rate.
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Step 2
Calculate APR using the monthly periodic rate. Divide the monthly rate by 12. For example, if your APR is 18 percent, divide it by 12 to get a monthly periodic rate of 1.5 percent. You can then determine your monthly finance charge by multiplying your monthly periodic rate by the balance on your credit card. For example, if your balance is $100, multiply it by 1.5 percent to get a finance charge of $1.50.
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Step 3
Calculate APR using the daily periodic rate calculation. Divide your daily periodic rate by 365 days. For example, divide your rate of 18 percent by 365 to get .05 percent. Calculate your finance charge by multiplying the average daily balance by the daily periodic rate, and multiply that figure by the number of days in the billing cycle. For example, multiply a balance of $100 by .05 (daily periodic rate) by 31 (the number of days in the cycle), which gives you a finance charge of $1.02.
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Step 4
Check each of your calculations twice. The final step in the process is checking the calculations for accuracy. This will ensure you make the best choice when comparing APRs on credit cards.
