How to Calculate Bank Interest Payments
When you put money in a deposit account at a bank, you are essentially loaning the money to the bank for an unspecified period of time. In return for leaving your money in the account, the bank pays you a specified percentage as interest. In order to calculate how much interest the bank will pay you, you need to calculate your average daily balance and the periodic interest rate.
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Instructions
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Check your bank account information to determine how often interest is compounded. Most banks compound interest on a monthly basis--or 12 times per year.
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Add the value of your bank account at the close of each day and divide by the number of days per month to calculate the average daily balance for the month. For example, if for the first 10 days of the month you had $1,400 and then you deposited an additional $400 for the last 20 days, you would multiply $1,400 by 10 (10 days with an ending balance of $1,400) and $1,600 by 20 (20 days with an ending balance of $1,600) and divide the result by 30 to get $1533.33.
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Divide the annual interest rate by the number of times per year the interest is compounded to calculate the periodic interest rate. Continuing the example, if your bank account paid 3.6 percent per year and compounded interest monthly, you would divide 3.6 by 12 to get 0.3.
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Divide the periodic interest rate by 100 to convert from a percent to a decimal periodic rate. In this example, you would divide 0.3 by 100 to get 0.003.
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Multiply the decimal periodic rate by the average daily balance to calculate how much interest that bank will pay you for that month. Finishing this example, you would multiply $1,533.33 by 0.003 to find that at the end of the month you would have $4.60 deposited in your account as interest.
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References
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