Daily Interest Calculator

Daily interest is calculated by dividing the annual interest rate by the number of days in the year, then multiplying by the principal. SIMPLE INTEREST FORMULA: Daily Interest = Principal × (Annual Rate / Days in Year). Total Interest = Daily Interest × Number of Days. EXAMPLE: Principal: $10,000. Annual Rate: 5%. Days: 30. Using 365-day year: Daily Rate = 5% / 365 = 0.01370%. Daily Interest = $10,000 × 0.0001370 = $1.37. Total Interest = $1.37 × 30 = $41.10. COMPOUND INTEREST (daily compounding): A = P × (1 + r/n)^(n×t). Where n = 365 for daily compounding. Interest = A - P. KEY FACTORS: Principal amount. Annual interest rate. Number of days. Day count convention (365, 366, or 360).

Day count conventions determine how interest is calculated based on the number of days in a year. Different financial products use different conventions. ACTUAL/365 (FIXED): Uses 365 days per year regardless of leap year. Most common for savings accounts and loans. Also called "ACT/365" or "English" convention. ACTUAL/366 (LEAP YEAR): Uses 366 days for leap years. More accurate for year-spanning calculations. Used when precision matters. ACTUAL/360 (MONEY MARKET): Uses 360-day year. Results in slightly higher interest (365/360 times more). Common in US money markets and Treasury bills. Also called "ACT/360" or "French" convention. 30/360 (BOND BASIS): Assumes 30 days per month, 360 per year. Simplifies bond calculations. Also called "30/360 US" or "NASD". WHY IT MATTERS: Using 360 vs 365 can mean ~1.4% more interest. Example: $10,000 at 5% for 30 days. Actual/365: $41.10. Actual/360: $41.67. Difference: $0.57. Always confirm which convention applies to your financial product.

Simple and compound interest calculate earnings differently, with compound interest generally earning more over time. SIMPLE INTEREST: Interest calculated only on the original principal. Formula: I = P × r × t. Same interest amount each period. Easier to calculate. Common in: short-term loans, some bonds. COMPOUND INTEREST: Interest calculated on principal PLUS accumulated interest. Formula: A = P × (1 + r/n)^(n×t). Interest grows exponentially. "Interest on interest" effect. Common in: savings accounts, CDs, mortgages. COMPARISON EXAMPLE: $10,000 at 5% for 1 year: Simple: $10,000 × 0.05 = $500.00. Compound (daily): $10,000 × (1 + 0.05/365)^365 - $10,000 = $512.67. Difference: $12.67. THE POWER OF COMPOUNDING: The difference grows significantly over time. 10 years at 5%: Simple: $5,000 total interest. Compound: $6,470 total interest. 30% more with compounding! WHEN EACH IS USED: Simple: Short-term loans, car loans, some bonds. Compound: Savings accounts, mortgages, credit cards, investments.

Credit cards use a specific method to calculate daily interest on your outstanding balance, which can result in higher costs than you might expect. DAILY PERIODIC RATE (DPR): Annual APR ÷ 365 = Daily Rate. Example: 20% APR ÷ 365 = 0.0548% daily. HOW IT WORKS: 1. Balance is checked at end of each day. 2. Daily interest = Balance × Daily Rate. 3. Interest is added to balance (compounds). 4. Process repeats daily. AVERAGE DAILY BALANCE METHOD: Most cards use average daily balance. Sum of daily balances ÷ days in billing cycle. Interest charged on this average. EXAMPLE: Day 1-15: Balance $1,000. Day 16-30: Balance $2,000. Average = [(1000×15) + (2000×15)] / 30 = $1,500. Daily rate (20% APR) = 0.0548%. Monthly interest = $1,500 × 0.0548% × 30 = $24.66. GRACE PERIOD: No interest if you pay in full by due date. Grace period typically 21-25 days. Only applies to purchases, not cash advances. MINIMIZING CREDIT CARD INTEREST: Pay full balance monthly. Make payments early in billing cycle. Avoid cash advances (no grace period). Consider balance transfer for high balances.

Savings accounts typically accrue interest daily but pay it monthly, using compound interest calculations. HOW DAILY ACCRUAL WORKS: 1. Bank checks your balance at end of each day. 2. Calculates daily interest on that balance. 3. Accrues (tracks) interest but doesn't add it yet. 4. At month end, accumulated interest is credited. CALCULATION: Daily Rate = APY / 365 (or 366 in leap year). Daily Interest = Balance × Daily Rate. Monthly Credit = Sum of daily interest. EXAMPLE: Balance: $10,000 (constant). APY: 4.5%. Daily Rate: 4.5% / 365 = 0.01233%. Daily Interest: $10,000 × 0.0001233 = $1.23. Monthly (30 days): $1.23 × 30 = $36.90. APY VS APR: APR: Annual Percentage Rate (simple). APY: Annual Percentage Yield (includes compounding). APY is slightly higher due to compound effect. Banks advertise APY for savings (higher number). MAXIMIZING SAVINGS INTEREST: Keep balance high early in month. Avoid withdrawals before interest posts. Look for high-yield savings accounts (4-5% APY). Consider CDs for even higher rates. Check if minimum balance required for stated APY.

To calculate interest between two dates, you need to determine the number of days and apply the appropriate formula. STEP-BY-STEP PROCESS: 1. Calculate Days Between Dates: Count calendar days from start to end date. Be clear on whether to include both dates. Our calculator accepts number of days directly. 2. Determine Day Count Convention: Check what your financial product uses. Most common: Actual/365 or Actual/360. 3. Calculate Daily Rate: Daily Rate = Annual Rate / Days in Year. 4. Calculate Total Interest: Simple: Interest = Principal × Daily Rate × Days. Compound: Interest = Principal × (1 + Daily Rate)^Days - Principal. EXAMPLE: Start Date: January 1. End Date: March 15. Days: 73 (31+28+14). Principal: $5,000. Annual Rate: 5%. Actual/365: Daily Rate = 0.05 / 365 = 0.000137. Simple Interest = $5,000 × 0.000137 × 73 = $50.00. SPECIAL CONSIDERATIONS: Leap years: February has 29 days. Partial months: Count actual days. Weekend/holidays: Usually count all calendar days. Month-end accruals: Banks may have specific rules. COMMON DATE RANGES: 30 days ≈ 1 month. 90 days ≈ 1 quarter. 180 days ≈ 6 months. 365 days = 1 year.

The Effective Annual Rate (EAR), also called Annual Percentage Yield (APY), is the actual annual return considering the effect of compounding. WHY EAR MATTERS: Stated rate (APR) doesn't show true cost/return. EAR accounts for compounding frequency. Higher compounding frequency = higher EAR. Allows fair comparison between products. EAR FORMULA: EAR = (1 + r/n)^n - 1. Where r = nominal annual rate, n = compounding periods per year. COMPOUNDING FREQUENCY COMPARISON: For 5% nominal rate: Annual (n=1): EAR = 5.00%. Quarterly (n=4): EAR = 5.09%. Monthly (n=12): EAR = 5.12%. Daily (n=365): EAR = 5.13%. Continuous: EAR = 5.13% (e^0.05 - 1). EXAMPLE CALCULATION: APR: 12% (credit card). Monthly compounding (n=12). EAR = (1 + 0.12/12)^12 - 1. EAR = (1.01)^12 - 1 = 12.68%. You pay 12.68%, not 12%! PRACTICAL APPLICATIONS: Savings: Look for highest APY/EAR. Loans: Lower EAR means lower cost. Comparison: Use EAR to compare different products. Credit cards: True cost is much higher than stated APR. RULE OF THUMB: More frequent compounding = higher EAR. For savings: Higher EAR is better. For loans: Lower EAR is better.

Loans calculate daily interest based on the outstanding principal balance, which decreases as you make payments. SIMPLE DAILY INTEREST LOANS: Daily Interest = Outstanding Balance × (Annual Rate / 365). Interest is recalculated daily. Each payment: Interest first, then principal. Common in: Auto loans, personal loans. HOW PAYMENTS ARE APPLIED: 1. Calculate accrued interest since last payment. 2. Payment first covers accrued interest. 3. Remainder reduces principal. 4. Next day's interest calculated on new, lower balance. EXAMPLE: Loan Balance: $20,000. Annual Rate: 6%. Days Since Last Payment: 30. Accrued Interest = $20,000 × (0.06/365) × 30 = $98.63. If Payment is $400: To Interest: $98.63. To Principal: $301.37. New Balance: $19,698.63. AMORTIZED VS SIMPLE INTEREST: Amortized: Fixed payment schedule, interest front-loaded. Simple Daily: Interest varies based on payment timing. Early payments save more with simple daily interest. SAVING MONEY ON LOANS: Pay early: Less time for interest to accrue. Pay extra: Reduces principal faster. Biweekly payments: Effectively one extra payment per year. Round up payments: Small extra goes to principal. WHEN DAILY INTEREST HURTS: Late payments: Extra days = extra interest. Minimum payments: Maximum interest accumulation. Long loan terms: More total interest paid.