Finance Calculators
Interest Rate Converter
Two offers can quote the same annual number and charge different amounts, because one compounds and the other does not. This page reads the rate you hold — nominal or effective — and converts it into the other basis, the rate each compounding period applies, and the monthly rate a payment schedule is built on.
Calculator
How the conversion works
A nominal annual rate is the quoted figure: divide it by twelve for the monthly rate a payment schedule applies, and compound it at the chosen frequency to get the effective annual rate, (1 + rate ÷ periods)^periods − 1. An effective annual rate is the figure after compounding: take the n-th root for the periodic rate, multiply by the periods for the nominal rate, and take the twelfth root for the monthly equivalent. The two are equal only when interest compounds once a year.
About This Calculator
What It Does
This calculator converts one annual interest rate into every figure a comparison needs. State the rate you hold as the nominal annual rate (APR) or the effective annual rate (EAR or APY), choose how often interest compounds, and the page returns the monthly rate, the periodic rate for that frequency, and the nominal and effective annual rates side by side. Every figure is published arithmetic over the number you enter.
Worked Example
The page opens with a 6.5 % nominal annual rate compounded monthly. The monthly rate is 6.5 ÷ 12 = 0.5417 %. The effective annual rate is (1 + 6.5 % ÷ 12)^12 − 1 = 6.6972 %, and the nominal annual rate is the 6.5 % entered. Because the chosen frequency is monthly, the rate per compounding period is the same 0.5417 % as the monthly rate, so the page prints that figure once. Switch the basis to effective and the conversion runs the other way: 6.5 % effective at monthly compounding is 6.314 % nominal and 0.5262 % a month.
Real-World Usage
Compare a credit card quoting 21.9 % APR against a loan quoting a nominal rate with fees folded elsewhere, or check what a savings account advertising an APY pays in monthly terms. A lender quoting a nominal annual rate and a bank quoting an effective yield describe the same year in different words, and this page puts them in one.
Local Context
Rate quotations describe the product and its compounding, not the country: the formulas are published arithmetic and the page carries no rate table. The wording does vary — the nominal annual rate is quoted before compounding, the effective annual rate (APY in the United States, AER in the United Kingdom, TAE in Spain, TAEG in Italy) after it. The calculator reads whichever basis you state.
Last reviewed: November 2026.
Frequently Asked Questions
What is the difference between APR, nominal and effective rate?
The nominal annual rate is the stated yearly figure before compounding, the one usually quoted as an APR before fees. The effective annual rate (EAR, or APY on savings) is what that figure becomes once compounding is counted — at 6.5 % compounded monthly it is 6.6972 %. This page converts between the two and shows the monthly rate each implies.
How do I get the monthly rate from an annual rate?
From a nominal annual rate, divide by twelve: 6.5 % a year is 0.5417 % a month. From an effective annual rate, take the twelfth root of one plus the rate and subtract one: 6.5 % effective is 0.5262 % a month. Enter the rate, set the basis, and the page returns both conversions.
Why does the compounding frequency change the effective rate?
Because interest earns interest within the year. The same 6.5 % nominal rate gives 6.5 % compounded annually, 6.6972 % compounded monthly and 6.7153 % compounded daily — the same money quoted at three frequencies, which the page converts without changing the amount the rate describes.