Calculating interest due in a month.
B0bbyEwing
Forumite Posts: 865
Forumite
Hoping someone can provide the formula you use on how to calculate what interest you expect to earn on a given amount in a month (or year).
Reason behind asking...
When I was buying my house I chased any rate that was higher than what I was on. If my account got me 4.56% interest but I saw a new one come out at 4.57% then I went for it. Anything to squeeze more pence here & there.
These days I can't be bothered opening accounts every other day.
So my savings account will be X.YZ%. Say 4.30%. It's all well & good seeing a new account offering 4.90% but I'm wanting to know in money terms to me what sort of difference that 0.60% will be  hence asking if you can help with the formula so I can do it myself in future.
* I understand it wont be able to calculate if the balance is changing all the time so we'll have to assume a constant balance, which is fair enough. Or an average balance if that would also work.
Over to you.
Reason behind asking...
When I was buying my house I chased any rate that was higher than what I was on. If my account got me 4.56% interest but I saw a new one come out at 4.57% then I went for it. Anything to squeeze more pence here & there.
These days I can't be bothered opening accounts every other day.
So my savings account will be X.YZ%. Say 4.30%. It's all well & good seeing a new account offering 4.90% but I'm wanting to know in money terms to me what sort of difference that 0.60% will be  hence asking if you can help with the formula so I can do it myself in future.
* I understand it wont be able to calculate if the balance is changing all the time so we'll have to assume a constant balance, which is fair enough. Or an average balance if that would also work.
Over to you.
0
Comments

0.6% is 60 pence per £100 you have in savings for a year.
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Take the gross rate, divide by 365. That's the daily rate you'll earn on the closing balance of your account. So, for example, for a difference of 0.01% gross pa, you'd earn an extra 0.27p per day per £10k balance. Whereas for a 0.6% difference, you'd earn an extra 16p per day per £10k. If you lose a days interest switching between accounts, then at 4.30% that's £1.18 per £10k to recoup before you would break even (which would take over a year if you switched for a 0.01% difference in rate, but a little over a week if switching for a 0.6% difference).
1 
Don't forget to take tax into account as well, if offsetting a mortgage or if you also use ISAs. Assuming 20% tax, multiply any tax free savings by 1.25 to find the equivalent taxable rate, and multiply taxable savings rates by 0.8 to find the equivalent tax free rateI consider myself to be a male feminist. Is that allowed?1

Nurse striving for financial freedom1

This calculator lets you specify start and end dates and is more precise than a calculator that only uses months
https://www.newsquarechambers.co.uk/resources/interestcalculator/
3 
masonic said:Take the gross rate, divide by 365. That's the daily rate you'll earn on the closing balance of your account. So, for example, for a difference of 0.01% gross pa, you'd earn an extra 0.27p per day per £10k balance. Whereas for a 0.6% difference, you'd earn an extra 16p per day per £10k. If you lose a days interest switching between accounts, then at 4.30% that's £1.18 per £10k to recoup before you would break even (which would take over a year if you switched for a 0.01% difference in rate, but a little over a week if switching for a 0.6% difference).
Just a little clear up in case my post was misleading  I never opened & transferred the lot in one go, so xthousands would be lost in cyberspace somewhere while the opening was going on.
I'd open an account for the minimum amount leaving the original savings account as it was. Then once the new one is up & running, I'd transfer the lot so it's there at day end.
I also didn't literally change accounts for 0.01% (at least I don't think I did), but I would do it any time I saw anything higher. 0.05% was the smallest amount I remember moving account for for 100% certainty.0 
If you use either an iPhone or iPad I recommend the App CompoundInt https://apps.apple.com/gb/app/compoundinterestcalc/id5437476380
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