Bank Interest calculation

bigadaj

innovate wrote: »

How many potential pence are we talking about?

Significantly less than the OP owes other posters on a time recharge basis.

SnowMan

My spreadsheet I check my interest with uses the theoretically correct power based formula, and approximates leap years by using 365.25 in the formula, so gross interest on £1 from date 1 to date 2 is

(1+ AER)^((date 2 - date 1)/365.25) - 1

It invariably gets extremely close to the actual interest paid by banks and savings institutions, which may be based typically on the archaic and somewhat outdated BBA simple interest formulae earlier mentioned.

Of course if you lose 1 day's interest in the process of moving to a different bank at a later date, or if you lose or gain a few days interest by transferring to or from say Nat West at a weekend, the effect is greater than any leap year issue. It is still trivial though.

Which is why I can't view this thread too seriously and look at it as a source of limited entertainment.

redbuzzard

Depends on the interest rate, but we could be talking nearly a quid on a £10,000 deposit (before tax - maybe HMRC will jump on them).

As I said, it's a first world problem.

[Deleted User]

Hi,

[quote=[Deleted User];61844643]This is my point - someone who opened an acount over the whole of a leap year would receive an extra day's interest; [/QUOTE]

yes, but at a lesser rate,

£100 @ 5% = £5

£5 for 366 days =0.136612p/day,

£5 for 365 days= 0.136986p/day,

366 x 0.136612 =£4.9999992,

365 x 0.136986 = £4.999989,

so not a big difference.

[Deleted User]

bigadaj wrote: »

Significantly less than the OP owes other posters on a time recharge basis.

I had no idea that posters expect payment

The amount of the loss in interest is irrelevant. As I said in my earlier post, a matter of a few pounds. However, my main concern is that if the bank is saving on a few pounds of my money, I'm sure they will be doing a similar thing with other savers' money. A few pounds of my money multiplied by thousands of savers, add up to a disgusting sum that the bank may be profiteering. And this is why I raised the question to see if other people on this forum can confirm whether or not I have reasonable grounds for complaint.

[Deleted User]

Sensory wrote: »

Perhaps try interpreting the scenario from a different perspective: there were 366 days in 2012, and you opened your account on day 153, giving you 214 days of interest; had there only been 365 days in 2012, you would have only received 213 days of interest.

No - I still would have earned 214 days of interest, since my account was opened on 1st Jun. Total number of days ie 214 is made up from 01/06 to 31/12. You only gain the extra day if the account had been opened before 29th Feb - It's only then that the extra day would be added to the number of interest earning days.

[Deleted User]

SnowMan wrote: »

You overlook that the leap year is purely an astronomical correction - and irrelevant for accounting purposes :beer:

Thank you Snowman - I can see I converted you to my way of thinking:j

innovate

[quote=[Deleted User];61876639]Thank you Snowman - I can see I converted you to my way of thinking:j[/QUOTE]


Am I missing something? Do I want to be converted?

SnowMan

innovate wrote: »

Am I missing something? Do I want to be converted?

Indeed you do.

In Great Britain, the Julian calendar was adopted in September 1752. In order to deal with the discrepancy of days, which by now had grown to eleven, it was ordered that 2nd September 1752 would be immediately followed by 14th September 1752. However interest was not paid on savings accounts for those 11 days.

This led to crowds of people on the streets demanding, 'Give us back our savings interest for 11 days!'

Another clear example of the need to dstinguish between astronomical corrections and accounting corrections.

innovate

SnowMan wrote: »

Indeed you do.

OK. Ready to convert. What to, though? Sorry to be dim.