1. What is Daily Interest Calculation?

Daily interest calculation determines how much interest your savings earn each day based on your account balance and annual interest rate. This is particularly useful for accounts that compound interest daily.

2. How Does the Calculator Work?

The calculator uses the daily interest formula:

Where:

• \( Balance \) — Current account balance in dollars
• \( Rate \) — Annual interest rate (converted to decimal)
• 365 — Number of days in a year

Explanation: The formula divides the annual rate by 365 to get the daily rate, then multiplies by the account balance to calculate daily interest earnings.

3. Importance of Daily Interest Calculation

Details: Understanding daily interest helps savers estimate their earnings, compare different savings products, and see how compound interest accumulates over time.

4. Using the Calculator

Tips: Enter your current account balance in dollars and the annual interest rate as a percentage. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why divide by 365 instead of 360?
A: Most modern financial institutions use 365 days for interest calculations, though some may use 360. Check with your specific bank for their method.

Q2: Does this account for compound interest?
A: This calculates simple daily interest. For compound interest, the calculation would be more complex as it would need to account for interest earned on previous interest.

Q3: Are there accounts that pay interest daily?
A: While interest is typically calculated daily, most accounts pay interest monthly or quarterly. Some high-yield savings accounts may compound interest daily.

Q4: How does this differ from APY?
A: APY (Annual Percentage Yield) includes the effect of compounding, while this calculator shows the simple daily interest based on the stated annual rate.

Q5: Is the interest calculated before or after taxes?
A: This calculator shows gross interest earnings before any taxes or fees are deducted.