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Daily Interest Formula:
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Daily interest calculation determines the amount of interest earned on a savings account balance each day based on the Annual Percentage Yield (APY). This helps savers understand how their money grows daily through compound interest.
The calculator uses the daily interest formula:
Where:
Explanation: The formula converts the annual interest rate to a daily rate by dividing by 365 days, then multiplies by the account balance to determine daily earnings.
Details: Understanding daily interest helps savers track account growth, compare different savings products, and make informed decisions about where to keep their money for optimal returns.
Tips: Enter your current savings balance in dollars and the APY percentage offered by your bank. Both values must be positive numbers to calculate accurate daily interest earnings.
Q1: What's the difference between APR and APY?
A: APR (Annual Percentage Rate) doesn't include compounding, while APY (Annual Percentage Yield) does include compounding effects, making APY more accurate for savings calculations.
Q2: How often is interest typically compounded?
A: Most savings accounts compound interest daily, though some may compound monthly or quarterly. Daily compounding maximizes earnings.
Q3: Does this calculation account for taxes?
A: No, this calculates gross daily interest before taxes. Interest earnings are typically subject to income tax.
Q4: Can I use this for certificates of deposit (CDs)?
A: Yes, this formula works for any savings product with daily compounding, including CDs and high-yield savings accounts.
Q5: Why divide by 365 instead of 360?
A: Most banks use 365 days for daily interest calculations, though some may use 360. Check with your specific financial institution for their method.