Leap Year Interest

Descrabled

I was just thinking about the methods used to calculate interest during the leap year. Interest is calculated daily on the balance of the account and then paid either monthly or yearly as appropriate. Thus for the Barclays Rainy Day a £5k balance in Dec 23 £5k * 5% * 31 / 365.

Now what happens in Feb 24 and indeed in any month of this new year?

boingy

You get a 1/366 amount of interest each day rather than 1/365. 

JGB1955

Some of my fixed savings accounts are already working on a daily 366th rather than 365th.  I'm assuming that following their first anniversary, the daily interest will increase, if minusculy!  

EthicsGradient

I think it varies between providers - buried somewhere in their terms and conditions. Some give you the same amount of interest per day as before, so you get 366 of those between the same calendar days. A fixed term account I have says that every year is 365 days, so it'll mature a day earlier than when it was started.

AmityNeon

There's no industry standard so providers do as they wish, and they don't necessarily include such details in their terms and conditions. Any of the following is possible (by no means exhaustive):

• Daily interest is always 1/365.
• During calendar leap years only, daily interest is 1/366.
• During the tax year that includes February 29th, daily interest is 1/366.
• For fixed terms, the annual anniversary dictates the annual period, which may or may not have 366 days. Daily interest could be 1/365 or 1/366, or always 1/365 regardless.

Descrabled

Thank you all for your help and, after considering the comments from AmityNeon, I have examined the T&C for a handful of my accounts and concur that different methods appear to be used. Some specifically refer to aleays using a 365 day year.

Thanks to all for replying.