What is 1% per month as an annual rate?

12.68% per year, not 12%. The equivalent rate is (1 + 0.01)^12 − 1 = 12.68%, because of compounding.

How do I convert an annual rate to monthly?

Use (1 + annual rate)^(1/12) − 1. For example, 12.68% per year is equivalent to 1% per month.

What is the difference between nominal and effective rates?

The nominal rate (like APR) ignores compounding within the year; the effective rate (like APY) is what you actually pay or earn. Compare offers using effective rates.

Can I add rates from different periods?

Not directly. Combine compound rates by multiplying the (1 + rate) factors and subtracting 1 at the end — never by adding the percentages.

Finance

Interest Rate Converter

Converting an interest rate between periods is not a matter of multiplying or dividing by 12: with compounding, 1% per month is 12.68% per year, not 12%. Get the correct equivalent effective rate.

Your numbers

Result

Rate per month

Rate per year

12.68%

Rate per day: 0.03%

Equivalent effective rate per period
Period	Equivalent rate
Per day	0.03%
Per month	1%
Per year	12.68%

Why it is not just ×12

Because interest compounds: each month earns on top of the previous months. The effective annual rate is (1 + monthly)^12 − 1, so 1% per month equals 12.68% per year — not 12%. Going the other way, (1 + annual)^(1/12) − 1 turns 12.68% per year back into exactly 1% per month.

Nominal vs. effective (APR vs. APY)

A "12% annual rate compounded monthly" is a nominal rate: in practice it charges 1% per month, which is 12.68% effective over the year. In the US this is the difference between APR (nominal, what loans quote) and APY (effective, what savings accounts advertise). This converter always works with equivalent effective rates.

When you need this conversion

To compare offers quoted in different periods (a loan priced per month against one priced per year), to check what a card's monthly rate really costs annually, and to keep rate and term in the same unit before computing payments or returns. Mixing a monthly rate with a term in years is one of the most common interest math mistakes.

Informational and educational result. Not a substitute for professional advice.

Frequently asked questions

Sources

Financial mathematics — equivalent and effective interest rates

Related calculators