The monthly interest rate for this credit card is 1.4875%.
The effective annual rate is 19.385%.
What is interest?
An interest can be defined as a percentage rate that is added to a capital for a stipulated period of time, it can be variable or constant depending on the type:
- Simple interest : it is always based on the same capital.
- Compound interest : it is based on the current capital, i.e. it is variable and increases.
If the credit card has an interest rate of 17.85% capitalizable monthly, then to know the monthly interest rate we only need to divide by the number of months of the year.
17.85% / 12
1.4875%
For the effective annual rate we use the following equation:
Te = (1 + i)ⁿ - 1
Te = (1 + 1.4875%)¹² - 1
Te = 0.19385 = 19.385%
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