How is interest calculated?

[bruncher]

Has anyone looked into how long money has to be deposited in order to earn interest?

If interest is calculated on a daily basis - like this from Nationwide's T's & C's :

"Interest is calculated on a daily basis using the annual interest rate divided by 365 days, including in a leap year."

Does this mean that money needs to be deposited for 24 hours? How is a 'day' defined?

[uspaul666]

https://www.nationwide.co.uk/-/assets/n ... counts.pdf

Section 7, Except for money paid in by cheque, we start calculating interest on money in your account from the date it is received by us ... Interest continues to be calculated on the money in your account up to (but not including) the day it is taken out.

So pay cash in via a branch on a Tuesday and take it out on the following Thursday, it'll get accrue two days interest for Tuesday and Wednesday. When the interest is actually credited to the account is a different manner. Typically it might be credited on the annual anniversary of the account or when you close the account.

[tjh290633]

Many years ago we were negotiating a contract. Barclays were involved in arranging finance. From memory they used 350 days to calculate the annual interest. We expressed surprise but they said it was always done like that.

This was in Moscow in the late 1980s, by the way.

TJH

[dealtn]

Has anyone looked into how long money has to be deposited in order to earn interest?

If interest is calculated on a daily basis - like this from Nationwide's T's & C's :

"Interest is calculated on a daily basis using the annual interest rate divided by 365 days, including in a leap year."

Does this mean that money needs to be deposited for 24 hours? How is a 'day' defined?

No. Funds can be deposited 1 minute before close of business on day zero, and removed 1 minute after opening on day one, and you will be entitled to 1 day's interest (unless specifically contradicted in the Ts & Cs).

[bruncher]

Has anyone looked into how long money has to be deposited in order to earn interest?

If interest is calculated on a daily basis - like this from Nationwide's T's & C's :

"Interest is calculated on a daily basis using the annual interest rate divided by 365 days, including in a leap year."

Does this mean that money needs to be deposited for 24 hours? How is a 'day' defined?

No. Funds can be deposited 1 minute before close of business on day zero, and removed 1 minute after opening on day one, and you will be entitled to 1 day's interest (unless specifically contradicted in the Ts & Cs).

for online accounts is "close of business" for today, when the clock passes midnight into the next day?

[Genghis]

Different banks have different end of day cut off times in the evening. So any amounts held at that time earn interest. It used to be possible to transfer from say Bank 1 earning interest at 8pm to Bank 2 earning interest at 9pm etc to earn multiple interest but the banks wised up to such movements.

[Myfyr]

Has anyone looked into how long money has to be deposited in order to earn interest?

If interest is calculated on a daily basis - like this from Nationwide's T's & C's :

"Interest is calculated on a daily basis using the annual interest rate divided by 365 days, including in a leap year."

Does this mean that money needs to be deposited for 24 hours? How is a 'day' defined?

Different banks have different end of day cut off times in the evening. So any amounts held at that time earn interest. It used to be possible to transfer from say Bank 1 earning interest at 8pm to Bank 2 earning interest at 9pm etc to earn multiple interest but the banks wised up to such movements.

Bruncher can’t work out interest, but Genghis Khan.

[Spet0789]

Many years ago we were negotiating a contract. Barclays were involved in arranging finance. From memory they used 350 days to calculate the annual interest. We expressed surprise but they said it was always done like that.

This was in Moscow in the late 1980s, by the way.

TJH

It will have been 360 days.

[tjh290633]

Many years ago we were negotiating a contract. Barclays were involved in arranging finance. From memory they used 350 days to calculate the annual interest. We expressed surprise but they said it was always done like that.

This was in Moscow in the late 1980s, by the way.

TJH

It will have been 360 days.

Very probably. It certainly had a zero at the end.

TJH

[dealtn]

Many years ago we were negotiating a contract. Barclays were involved in arranging finance. From memory they used 350 days to calculate the annual interest. We expressed surprise but they said it was always done like that.

This was in Moscow in the late 1980s, by the way.

TJH

It will have been 360 days.

Very probably. It certainly had a zero at the end.

TJH

30/360 is a very common interest calculation basis. All months are equal at 30 days with 12 of them making a standard 360 day year.

You can find, among others, actual/actual, actual/360, and actual/365. It will be expressed in the terms and conditions of an account or bond term sheet.