1. What is Daily Interest Calculation?

Daily interest calculation determines how much interest your savings account earns each day based on your current balance and annual interest rate. This helps you understand your daily earnings and how compounding works.

2. How Does the Calculator Work?

The calculator uses the daily interest formula:

Where:

• \( balance \) — Current account balance in dollars
• \( rate \) — Annual interest rate (as percentage)
• 365 — Number of days in a year (does not account for leap years)

Explanation: The formula converts the annual rate to a daily rate by dividing by 365 days, then applies it to your current balance.

3. Importance of Daily Interest Calculation

Details: Understanding daily interest helps you see how compounding works, compare savings accounts, and project future earnings. Most banks calculate interest daily but compound it monthly.

4. Using the Calculator

Tips: Enter your current account balance and the annual interest rate offered by your bank. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why divide by 365 instead of 360?
A: While some banks use 360 days, most modern banks use 365 days for daily interest calculations.

Q2: How does compounding affect the actual interest earned?
A: This calculator shows simple daily interest. Actual earnings may be higher due to compounding, depending on your bank's compounding frequency.

Q3: Is the rate entered as percentage or decimal?
A: Enter the rate as a percentage (e.g., 2.5 for 2.5%). The calculator automatically converts it to decimal form.

Q4: What's the difference between APR and APY?
A: APR is the annual rate without compounding, while APY includes compounding effects. This calculator uses APR.

Q5: How accurate is this for accounts with variable rates?
A: It provides a snapshot calculation. For variable rates, you'd need to recalculate whenever the rate changes.