What is the real interest rate on a Credit Card loan bearing 24% interest per year, if the rate of inflation is 10%?

The real interest rate represents the actual cost of borrowing or the return on an investment after adjusting for inflation. According to the Fisher equation, the real interest rate is approximately equal to the nominal interest rate minus the inflation rate. In this scenario, the credit card loan carries a nominal interest rate of 24% per year. With an inflation rate of 10%, the approximate real interest rate is calculated as 24% - 10% = 14%. While a more precise formula exists—(1 + nominal rate) / (1 + inflation rate) - 1—the approximate formula is widely used in economic contexts for simplicity when rates are relatively low. This calculation highlights how inflation erodes the purchasing power of the interest paid, effectively reducing the lender's real gain and the borrower's real cost compared to the stated nominal rate.