Most high-yield savings accounts and many CDs compute interest daily and pay it monthly. This version starts on daily compounding, so you can type the rate your bank quotes and see the balance, the APY that rate produces and how much daily compounding adds compared with monthly or yearly.
When to use this
Handy for checking a bank's advertised APY against its stated rate, comparing two savings accounts that compound differently, projecting an emergency fund held in a high-yield account, or understanding why a credit card balance compounding daily grows so fast.
Frequently Asked Questions
How much more does daily compounding earn than monthly?
Very little. At 5% a year, daily compounding gives an APY of about 5.127% against 5.116% for monthly - roughly $1 more per year on every $10,000. The headline rate matters far more.
What is the formula for daily compounding?
A = P(1 + r/365)^(365t). For $10,000 at 5% for 10 years that is about $16,487. Some banks use 360 days instead of 365, which raises the yield very slightly.
Do credit cards compound daily?
Most do: interest is charged on the average daily balance at the APR divided by 365. At a 24% APR that compounds to an effective rate above 27% a year, which is why carrying a card balance is so expensive.
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