Basic Question, When is ING/EMMIGRANTS % compounded

[Willacuz]

In every day terms, If i put 10000 into an ing or emmigrant account, what should i expect?


do they do 10000 x 3.25% daily? (I dont think this is true, but ive read it on the forum)

Or monthly?

What formula do they use, and how often do they do it?

I know its very basic, but sheesh.. Id love to know.

[34saving]

I think they're actually a tiny bit different, but I think ING (at least) is compounded daily and credited monthy. So, $10,000*(.0300/365daily percentage rate)*31days in a month = about $25.50 a month in interest. Then that $25.50 would be added to your account so your $10,000 would be $10,025.50 the next month. The "real" math is a bit more complicated, but I think this estimate is within a few cents. If you need perfection let the board know and I'm sure somebody (I'm going to bed for the night, so it probably won't be me) will give you the full story

[jmjj215]

If you want to get it to more accurate than a few pennies then you are weird! And so am I!

[al0061]

Hi Willacuz. I asked myself the same question yesterday, so I looked it up and pasted the results in a document, for the next time I forget.

ING

How do you calculate the interest on my account?
Interest on your savings account is accrued daily, compounded monthly and credited to your available balance at the end of each month.

Emigrant

How do you calculate the interest?

Interest on the American Dream Savings Account is compounded daily and credited monthly. For more details, see our Account Disclosure.

UFB

Interest is compounded daily and credited monthly based on the ending daily collected principal balance.

I'm not even remotely a math whiz. (My strength is words. Sometimes this is a curse.) But this tells me that Emigrant and UFB would actually yield more than ING??? Because ING compounds monthly rather than daily??

Someone please correct me if I'm wrong.

I have no idea how that would affect the calculation that saving34 provided. Can anyone provide the calculations for compounding daily vs. compounding monthly??

Torch - aka al0061

[34saving]

It actually doesn't really matter since all list three of them list their interest rates by APY (annual percent _yield_). So, when Emmigrant says their rate is 3.25% annually they've already accounted for how they compound the interest. Same with the other two. I suppose it makes a tiny bit of difference if you're moving money around a lot but probably not enough to bother thinking about.

The actual formula is (I'm doing this by memory, so sorry if I'm wrong . . .somebody will correct me.)

New balance = Old balance * (1+ (annual interest rate/number of times per year compounded)) to the exponent of ((annual interest rate/number of times per year compounded) * number of number of times compounded))

However, since we only know ING's (Emmigrant, etc.) APY we'd have to calculate the true annual rate before we could actually use the formula. Somebody might get that ambitious, but I hear a baby waking up, so it's not going to be me . . .at least not right now

[al0061]

Thanks, 34saving. That makes total sense, that the calc is covered by Yield vs Rate.

Torch - aka al0061

[terry1156]

The issue that many people seem to accidentally get confused about is the compounded "daily" vs "monthly" When these terms are mentioned, it doesn't mean your savings are multiplied by the % (3.00%) for those time periods - it's just how the banks do the numbers to come out for the rate for the YEAR. So the 3% is your yearly rate even if it is compounded daily or monthly.

[al0061]

Good point, Terry, and good explanation, too.
Thanks.

Torch - aka al0061