According to payday loans Kankakee IL, for the temporary use of the depositor’s funds, the bank is obliged to charge a monthly fee. In fact, this is done in accordance with the terms of the agreement between the bank and the client. The calculation of interest is included in the account maintenance and is performed without the participation of the depositor. But the depositor can independently calculate the interest on his saving account. To do this, you will need to acquire some skills and knowledge.
What are the interest rates on bank deposits?
Percentages are divided by default into simple and complex. And interest is accrued in two ways – according to a simple and complex formula. The second method includes several schemes that differ from each other in the variability of the calculations. What is the difference between simple interest and complex interest?
Simple rates on saving
The peculiarity of this type of saving rates is that the interest on the deposit is not added to the principal amount, they are sent to another account opened under the terms of the agreement. When concluding an agreement, the frequency of charges is also approved – once a month, quarterly, six months, a year, or at the end of the deposit term.
The second option is used for deposits with capitalization. Interest is automatically added to the body of the deposit, and each subsequent time the profit is accrued on a new, already increased amount. Thus, both the amount of the deposit and the amount of interest are regularly growing.
How to calculate deposit interest correctly?
First you need to understand for yourself all the terms for the deposit, in particular, the frequency of interest accrual (monthly, quarterly, etc.), the type of interest accrual (simple or complex). After that, you can apply a calculator and proceed to calculations.
How to use calculators?
The simplest thing is to use the deposit yield calculator on the website of the bank where the client opened or is going to open a deposit. Having chosen one of the options, you can see an online calculator by which it is easy to calculate income for this type of deposit. It is enough to enter the amount, the annual rate (it is entered automatically in the calculator for each product), the term of the deposit and click “Calculate”.
To calculate your income manually, you need to type the amount of the deposit on the calculator, multiply it by the ready rate, then for the number of days during which the deposit is valid.
Simple formula calculation
Accrual of interest on deposits without capitalization using a simple formula:
S = (P * I * t: K): 100
- S – accrued profit;
- P – the amount of the deposit;
- I – annual rate on the deposit;
- t – term of the deposit (number of days);
- K – the number of days in a year (when calculating rates, 365 days are always taken, even in a leap year).
Complex formula calculation
At the request of the client, interest on the deposit may not be charged to a separate account, but added to the body of the deposit. In this case, you need to calculate the profitability using a different, more complex formula:
S = ((P * I * (t: K)): 100) + ((P 1 * I * (t 1: K)): 100)