1. What is Daily Interest Accrual?

Daily interest accrual is the method by which interest is calculated on a daily basis for savings accounts. This method provides more accurate interest calculations compared to monthly or annual compounding.

2. How Does the Calculator Work?

The calculator uses the daily interest formula:

Where:

• \( Balance \) — Current account balance in dollars
• \( Rate \) — Annual interest rate in decimal form (e.g., 0.05 for 5%)
• \( Days \) — Number of days to calculate interest for

Explanation: The formula calculates how much interest would accrue over a specific number of days based on the account balance and annual interest rate.

3. Importance of Interest Calculation

Details: Understanding daily interest accrual helps savers estimate earnings, compare account yields, and make informed financial decisions about their savings.

4. Using the Calculator

Tips: Enter balance in dollars, interest rate as a decimal (e.g., 0.03 for 3%), and the number of days. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why divide by 365 in the formula?
A: This converts the annual rate to a daily rate by dividing by the number of days in a year.

Q2: Does this account for compound interest?
A: No, this calculates simple daily interest. For compound interest, the calculation would be more complex.

Q3: What's the difference between APR and APY?
A: APR is the annual rate without compounding, while APY includes the effects of compounding.

Q4: How often do banks typically credit interest?
A: Most banks credit interest monthly, though it's calculated daily in many cases.

Q5: Are there accounts with different compounding periods?
A: Yes, some accounts compound daily, monthly, quarterly, or annually - always check the terms.