Bank Interest calculation

SnowMan

innovate wrote: »

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

To join the worthy campaign for the essential enactment of primary legislation to decree that annual interest should be paid for the accounting year of 365 days.

You could write to your MP or you could start one of those petitions that gets a debate in parliament if you get 100,000 signatures.

If you are really serious you could chain yourself to the door of your nearest high street bank until the 365 day year is recognised.

Apathy is your enemy, it is time to act now.

Sensory

[quote=[Deleted User];61876325]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.[/QUOTE]

You do realise the reverse is also true: if an account was opened on June 1st 2011, there would be 366 days until its anniversary on June 1st 2012, yet 365 is used throughout the 2011 calculations. In this case the banks would be overpaying interest.

If the system did change to use 366 for the entirety of the forward projected year, yet the account holder closed their account before the start of 2012, they could complain that they were underpaid interest as the account was only open during 2011, which wasn't a leap year.

[quote=[Deleted User];61876511]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.[/QUOTE]

Note that I did say a different perspective, hence why I specifically mentioned day 153 instead of a date. The date is either June 1st or June 2nd depending on whether the year is a leap year.

[Deleted User]

SnowMan wrote: »

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.

Snowman - there was no 11 days loss of interest, since 2nd Sept was followed by 14th Sept; therefore no days had actually elapsed. With logic like yours, you must surely be a banker:beer: And who knows - perhaps banks were more civil and honest in those days.

But, thank you guys for all your comments - the serious ones as well as the lighthearted ones. :cool:

[Deleted User]

Sensory wrote: »

You do realise the reverse is also true: if an account was opened on June 1st 2011, there would be 366 days until its anniversary on June 1st 2012, yet 365 is used throughout the 2011 calculations. In this case the banks would be overpaying interest.

This is not the way my bank explained it to me. To take your example above, they calculate the number of days 1/06/11 - 31/12/11 and work out the interest for these days based on 365 days (2011 not leap year) Then the calculate days for 1/01/12 - 31/05/12 and work out interets for these days days but since 2012 is a leap year, they use 366 as the ratio. In this case, the interest due would be correct, but incorrect when the leap year day is not included in the interest earning days.

dtaylor84

[quote=[Deleted User];61879059]This is not the way my bank explained it to me. To take your example above, they calculate the number of days 1/06/11 - 31/12/11 and work out the interest for these days based on 365 days (2011 not leap year) Then the calculate days for 1/01/12 - 31/05/12 and work out interets for these days days but since 2012 is a leap year, they use 366 as the ratio. In this case, the interest due would be correct, but incorrect when the leap year day is not included in the interest earning days.[/QUOTE]

No, the interest due would be too high for a one year deposit (by your definition):

01/02/2011 - 31/12/2011 = 214/365
01/01/2012 - 31/01/2012 = 152/366

214/365 + 152/366 = 1.001602

And the following year:

01/02/2012 - 31/12/2012 = 214/366
01/01/2013 - 31/01/2013 = 151/365

214/366 + 151/365 = 0.998398

So it adds up to exactly two years' interest.

innovate

Heck, this is the first thread on this board which I cba to understand.

Sensory

[quote=[Deleted User];61879059]This is not the way my bank explained it to me. To take your example above, they calculate the number of days 1/06/11 - 31/12/11 and work out the interest for these days based on 365 days (2011 not leap year) Then the calculate days for 1/01/12 - 31/05/12 and work out interets for these days days but since 2012 is a leap year, they use 366 as the ratio.[/quote]

That's what I said: 365 is used throughout the 2011 calculations despite there being 366 days until the account's anniversary.

[quote=[Deleted User];61879059]In this case, the interest due would be correct, but incorrect when the leap year day is not included in the interest earning days.[/QUOTE]

Exactly; they're overpaying interest.

So if you wish to complain, it would have to be about the system as a whole, including the overpayment of interest

If it was changed, with the calculations based on the number of days until the anniversary of an account's opening (so either 365 or 366), one could open an account on 1st June 2011, close it on 31st December 2011, and complain that their interest was underpaid because 2011 wasn't a leap year.

There are problems with both approaches, but they only exist if accounts are not held for a sufficient length of time.

badger09

innovate wrote: »

Heck, this is the first thread on this board which I cba to understand.

Really? :rotfl: