If you carry a balance on your card and have an 18.5% APR compounded monthly,your actual rate will be
A)19.5%.
B)18.5%.
C)20.15%.
D)22.25%.

Question

Quizplus · Accepted Answer

When a credit card's APR is compounded monthly, the actual rate is higher than the stated APR. To calculate the actual rate, the formula is:

(1 + APR/12)^12 -1

Plugging in the numbers:

(1 + 0.185/12)^12 -1 = 0.2015 or 20.15%

Therefore, the correct answer is C) 20.15%.

If You Carry a Balance on Your Card and Have