Fixed and Flexible Time Deposits (Question)

[platorepublic]

I understand how fixed time (or term) deposits work - you put an amount in this account, and at the end of the maturity, say one year, they give you interest, based on their annual interest rate. Within this year, you cannot give or take money from that account.

For the flexible account, I am aware it depends on the bank how this may work. But the bank wasn't so clear about it so I want to ask how this probably will work.

All I know is that for this flexible account, there is also a set maturity time, say four months, and a set interest rate. You can add money to this account whenever you want, but withdraw only one time. Is this reasonable? How would they calculate the interest properly?

[scfr]

For the flexible account, I am aware it depends on the bank how this may work. But the bank wasn't so clear about it so I want to ask how this probably will work.

It does indeed depend on the bank. Get them to explain it until you understand. And if you are in the USA they should give you disclosure documents that explain interest calculation in writing. I just pulled out the documents for the account I opened most recently at a physical (not internet) bank; on page 11 of the "Consumer Deposit Products Terms & Conditions" booklet is a section called "Additional Account Information / How Interest is Calculated on Your Interest Bearing Account." Your bank should be able to supply you with something similar. If they won't, look for another bank.

[kork13]

While it varies to an extent, I believe the industry standard uses the average daily balance to figure your interest earned each month.

(I'm using simple numbers here)
So if you have a $1000 balance in the account for 10 days in the month, bring it up to $2000 in it for 10 days, and $3000 for the last 10 days, they average it out:

($1000*10 days)+($2000*10 days)+($3000*10 days) = ($10000+$20000+$30000) = $60000

Average daily balance = $60000/30 days = $2000. With an interest rate of 1.2% APY (compounded monthly), you would earn $2 of interest.