1. What is Daily Interest?

Daily interest is the amount of interest earned or paid each day on a principal amount based on an annual interest rate. It's commonly used in banking, loans, and investments to calculate accruing interest.

2. How Does the Calculator Work?

The calculator uses the daily interest formula:

Where:

• Principal — The initial amount of money ($)
• Annual 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, then applies it to the principal amount.

3. Importance of Daily Interest Calculation

Details: Understanding daily interest helps with financial planning, comparing loan or investment options, and understanding how interest compounds over time.

4. Using the Calculator

Tips: Enter the principal amount in dollars and the annual interest rate as a percentage (e.g., enter 5 for 5%). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Is the daily rate always annual rate divided by 365?
A: Most calculations use 365 days, but some financial institutions may use 360 days for simplicity.

Q2: How does this relate to compound interest?
A: Daily interest is the building block for daily compounding, where each day's interest is added to the principal for the next day's calculation.

Q3: What's the difference between simple and compound daily interest?
A: Simple interest calculates only on the original principal, while compound interest includes previously earned interest.

Q4: How accurate is this for leap years?
A: The difference is minimal (using 366 instead of 365 days), but for precise calculations in a leap year, you can adjust the denominator.

Q5: Can I use this for credit card interest?
A: Yes, but credit cards typically compound daily, so you'd need to account for the changing principal if calculating over multiple days.