Bank Savings Accounts Interest Rate
How do you calculate your Interest Income
that the bank pays you on your savings account?
Many people simply take for granted that your bank pays you the proper interest on your savings account each month, without knowing how they actually calculated the interest. It is a simple calculation and you should check your bank regularly on their calculations, not just on your interest you receive on your savings account, but also on the interest you pay on your car loan, home loan, or any other consumer loan you may have outstanding. Here is the simple interest calculation. Principal in your account, multiplied by the rate of interest your bank is paying, divided by 360 days (number of days in a year), multiplied by the number of days in the month (or the actual period of your statement, which could be different than the actual days in a month).
Here is an example. If you have $10,000 in your account, and the bank is paying you 5% interest during the month of February, your interest for the month would be:
$10,000. x 5% = $500.
$500. / 360 days = $1.38 cents per day
$1.38 cents per day x 28 days in Feb = $38.89
(Your actual interest may vary by a few cents due to rounding.)
Remember that this is simple interest, and you could be earning daily compounding, or actual days over 365, which would create a different result.
