Periodic Interest Rate Definition

A periodic interest rate is some fractional amount of an annual interest rate. The periodic interest rate is used to calculate interest for a period of time less than one year. For example, an annual percentage rate of 8% would have a monthly periodic interest rate of 8%/12, or about 0.667%; while the daily periodic interest rate would be 8%/365, or about 0.022%. Most credit cards accounts list an annual percentage rate but accrue interest on a monthly basis and therefore use a periodic interest rate.