1. What is Daily Interest?

Daily interest is the amount of interest earned or paid each day on a balance, calculated by applying the annual interest rate on a daily basis. It's commonly used in banking, loans, and investments.

2. How Does the Calculator Work?

The calculator uses the daily interest formula:

Where:

• Balance — The principal amount (in currency)
• Annual Interest Rate — The yearly interest rate (as a percentage)
• 365 — Number of days in a year

Explanation: The formula converts the annual rate to a daily rate by dividing by 365 days.

3. Importance of Daily Interest Calculation

Details: Calculating daily interest helps understand how much interest accrues each day, which is crucial for savings accounts, credit cards, loans, and investments that compound interest daily.

4. Using the Calculator

Tips: Enter the balance amount and annual interest rate (as a percentage, not decimal). The calculator will show the daily interest amount.

5. Frequently Asked Questions (FAQ)

Q1: Is 365 days always used in the calculation?
A: Most calculations use 365 days, but some financial institutions may use 360 days for simplicity.

Q2: How does compounding affect daily interest?
A: With daily compounding, interest is added to the principal daily, so each day's interest calculation includes previously earned interest.

Q3: What's the difference between APR and APY?
A: APR (Annual Percentage Rate) doesn't account for compounding, while APY (Annual Percentage Yield) does. This calculator shows simple daily interest without compounding.

Q4: Can I use this for credit card interest?
A: Yes, but credit cards typically compound interest daily, so the actual amount would be slightly higher than this simple calculation.

Q5: How accurate is this calculation?
A: This provides a basic estimate. For precise calculations, financial institutions may use exact day counts between transactions.