Similar questions with calculate interest rate account compunded daily accrued monthly

First you need to figure out what your daily interest rate is.  For example, you have an account earning 4%. You need to divide 4% by 365 to figure out your daily rate. .04/365 = .0001096%. This is the rate that is used daily to calculate the interest.

 

So for example, if you have $4,000 in your account, you will make about $0.4384.  (0001096% X $4,000). This money is set aside into a bank holding account each day until the end of the month. At the end of the month, all the money that was earned each day is added into the account to the original $4,000.  Thus at the end of the month, assuming you made no deposits or withdrawals, your account will have grown to $4,013.59.  ($0.4384 X 31 = $13.59). It depends on the number of days in the month whether you multiply by 28, 29, 30, or 31.

 

Then the next month, assuming no deposits, withdrawals, or change in interest rate, the new amount $4,013.59 is compounded daily and the same thing happens again.  The accrued interest is added  at the end of the month to create the balance for the next month.

 

Once you know the interest rate, it is easy to calculate the daily rate to give you your answer.

 

 

Ironically, having an APY is supposed to clarify what you are making, but I often see it confusing people sometimes!

 

There are so many things to answer here...  So I will just run through your paragraph from the top, and hope we catch them all:

 

"Compounded monthly, accrues daily" -- This means that at close of business each day, they look at your account and calculate your earnings for the day.  If you had a $1,000 dollars they would multiple it by their daily interest rate (let’s say "0.0001%").  They would take that 10 cents and put it in a separate "account."  The next day, the would do the math again, but WITHOUT your ten cents being multiplied; it’s accruing, not compounding.  At the end of a 30 day month, all those dimes would be deposited into your account for a total of $3.   Now, everyday of the next month, they would be figuring your interest against your $1,003.

 

As your year goes on, those months adding together will compound your return.  This is where the APY comes into play.  It is the number that represents what you will actually get out of one calendar year if you let everything sit the entire time.  You may only get $3 a month in the beginning, but near the end, it will be like $3.10 from compounding interest.  Now that I look at it, this rate of return I am figuring is higher than what you would expect from 3.6% APY.

 

You will have to look at you account’s fine print for the multiplier that they apply each day, in order to find out what you will get each month.  If you want to know what you will end up with at the end of the year, it’s $1,036, assuming a $1,000 dollar investment.  Not bad for an account that gives your money when you need it.

 

I personally have an account just like this at Fidelity.  It’s great to get a couple of free diners each year by only having my paycheck deposited and then paid out to bills through the month.

 

 

Sources: www.fidelity.com

I would expect most (if not all) of your answers will reference this site.  It is well known and reputable.  You can search for brick and mortar banks in your area or simply search for the highest rate, which will include online banks.

 

Currently the highest rate appears to be 4.45% from Emigrant Bank.

 

I would however expect these rates to sink like a stone in coming days/weeks based on recent events (cutting the interest rates by 3/4% on Tues with more cuts expected).

 

One online (only) bank that is very large and reputable is ING.  Currently their rates are 3.59%.

 

If you do not need this money to be liquid, consider "locking in" a rate w/ a CD, as those rates will be dropping too.

 

Interest rates are dropping to try get people to borrow money to stimulate the economy---don't look for the rates to go back up anytime soon....

 

One other thing....you mention is that your rate is 3.6%.  That really isn't too bad, considering current evetns.  Unless we are talking about a ton of cash, moving the money likely isn't worth the hassle.  Talking in general numbers, if you have $10,000 in a savings account you would earn about $360/year.  If you earn 4.6% on that same amount in the same time frame, you only earn $100 more.  You will have to "plug in" your numbers to this hypothetical equation to figure out if the effort is really worth it.  Also remember that you have to pay taxes on your earnings.

 

If you really don't need the money anytime soon, consider a CD or, better yet, a Roth IRA (if you qualify).  Roth IRA's have a savings account (MMA) type option (as well as stock based investment options) that will earn you the same amount of money as a traditional savings account but the money you would earn is **TAX FREE** and you can withdrawal any prinicpal deposited without penalty prior to retirement.

 

Best wishes!