Interest Calculation on Your Interest-bearing Checking Account

vychyslyay percentIf your checking account is interest-bearing (i.e. earns interest on the balance of deposited finds), you may want to calculate the interest accrued on it. Just make sure that your checking account is interest-bearing, as opposed to non-interest-bearing accounts, which only hold the account balance for the consumer without collecting any interest on their balance. To do so, check the statement of your checking account or ask your bank. You can calculate the interest on your interest-bearing account using the following guidelines.

Step 1. Find out the interest rate of your interest-bearing account – either from your bank or from the statement of your checking account.

Step 2. If the interest your account earns is simple, multiply your balance by your interest rate.

This way you will learn the total of the interest your account will earn. For instance, multiply your balance of $2,000 with the 5% simple interest (2,000 x .05) and you will earn $100for the given time period which is a month as a rule.

Step 3. Calculate the compound interest of your account using a calculator and the formula PV(R+1)^n, where PV stands for the present value of your account; R is your interest rate; and n is the number of your investment periods. It is variable and you can place any period you wish instead of it: if you need one year, place 1, and to calculate the compound interest for one month, place 1/12. With the formula 2000(1.05)^(1/12) you will calculate how much your $2,000 would earn at 5% compound interest a month. Just insert your numbers into the formula. Having compound interest on your account as opposed to simple interest is so much preferable.

A few more tips:

•When calculating your compound interest over a longer period of time, it is recommended to use an online calculator.
•Some checking accounts compound interest monthly, and some daily, so make sure to understand the exact terms of your checking account.
•In order to enjoy the interest benefit, you may need to maintain average balances of a certain amount.
With this guidance you are sure to state dramatic increase of your savings over time.

Leave a Reply