Comments on: Can someone clarify what interest rates do for the money in my savings account? http://www.financebis.com/20100709/can-someone-clarify-what-interest-rates-do-for-the-money-in-my-savings-account/ Financial Information Thu, 25 Aug 2011 17:43:20 +0000 hourly 1 http://wordpress.org/?v=3.3 By: RONALD E B http://www.financebis.com/20100709/can-someone-clarify-what-interest-rates-do-for-the-money-in-my-savings-account/#comment-89832 RONALD E B Sat, 10 Jul 2010 00:55:40 +0000 http://www.financebis.com/2010/07/09/can-someone-clarify-what-interest-rates-do-for-the-money-in-my-savings-account/#comment-89832 The 4.89% interest rate compounds monthly to yield the 5.0% APY. If you have $3000 in your savings account after 1 month you would have earned (1/12)x4.89% interest which on $3000.00 is $12.23. Is that the large amount of interest you expected? Interest rate versus APY: 4.89% rate equates to a 0.4075% rate per month. In 12 months the compounded yield (APY) would be (1.004075)^12-1 = 5.00% The 4.89% interest rate compounds monthly to yield the 5.0% APY. If you have $3000 in your savings account after 1 month you would have earned (1/12)x4.89% interest which on $3000.00 is $12.23. Is that the large amount of interest you expected?

Interest rate versus APY: 4.89% rate equates to a 0.4075% rate per month. In 12 months the compounded yield (APY) would be (1.004075)^12-1 = 5.00%

]]> By: whataday http://www.financebis.com/20100709/can-someone-clarify-what-interest-rates-do-for-the-money-in-my-savings-account/#comment-89831 whataday Sat, 10 Jul 2010 00:26:39 +0000 http://www.financebis.com/2010/07/09/can-someone-clarify-what-interest-rates-do-for-the-money-in-my-savings-account/#comment-89831 You will not make much on that. Only about $150 a year. You will not make much on that. Only about $150 a year.

]]> By: Troy Colts Rock http://www.financebis.com/20100709/can-someone-clarify-what-interest-rates-do-for-the-money-in-my-savings-account/#comment-89830 Troy Colts Rock Fri, 09 Jul 2010 23:34:23 +0000 http://www.financebis.com/2010/07/09/can-someone-clarify-what-interest-rates-do-for-the-money-in-my-savings-account/#comment-89830 The 4.89% sounds like the APR and the 5.00% sounds like the APY. Don't have time to get into the difference between the 2 but APR is easier to use for calculations so lets use that. The APR is for the entire year, not for each month ... so you wouldn't get 4.89% interest every month, you'd get 4.89% divided by 12. The formula to calculate your monthly interest is BALANCE x APR / 12. In your case, 3000 x 0.00489 / 12 = 12.225 The bank should round that up to $12.23 Hope that helps. If you want to know the diff between APR and APY, check out the below link ... The 4.89% sounds like the APR and the 5.00% sounds like the APY. Don’t have time to get into the difference between the 2 but APR is easier to use for calculations so lets use that.

The APR is for the entire year, not for each month … so you wouldn’t get 4.89% interest every month, you’d get 4.89% divided by 12.

The formula to calculate your monthly interest is BALANCE x APR / 12. In your case, 3000 x 0.00489 / 12 = 12.225

The bank should round that up to $12.23

Hope that helps. If you want to know the diff between APR and APY, check out the below link …

]]> By: StopSpending http://www.financebis.com/20100709/can-someone-clarify-what-interest-rates-do-for-the-money-in-my-savings-account/#comment-89829 StopSpending Fri, 09 Jul 2010 22:44:04 +0000 http://www.financebis.com/2010/07/09/can-someone-clarify-what-interest-rates-do-for-the-money-in-my-savings-account/#comment-89829 The 4.89% is an annual rate, but money is posted to your account typically on a monthly basis. Take .0489 and divide it by 12 and multiply it by 3,000. This yields you $12.23 in interest for your first month. In the second month, you'll have $3,012.23 in the bank, so your interest earned will be slightly higher. After 10 years, you'll have about $4887.20 if interest rates remain constant. Not a lot of money but growing. Good luck. The 4.89% is an annual rate, but money is posted to your account typically on a monthly basis. Take .0489 and divide it by 12 and multiply it by 3,000. This yields you $12.23 in interest for your first month. In the second month, you’ll have $3,012.23 in the bank, so your interest earned will be slightly higher. After 10 years, you’ll have about $4887.20 if interest rates remain constant. Not a lot of money but growing.

Good luck.

]]> By: NJGuy http://www.financebis.com/20100709/can-someone-clarify-what-interest-rates-do-for-the-money-in-my-savings-account/#comment-89828 NJGuy Fri, 09 Jul 2010 22:28:54 +0000 http://www.financebis.com/2010/07/09/can-someone-clarify-what-interest-rates-do-for-the-money-in-my-savings-account/#comment-89828 For each $1.00 in your account, you will earn 5 cents in interest each year. The earned interest will be added to the principal amount you have in the account. If you take money out of the account before the date of interest accrual, you will not receive anything for the amount you withdraw. For each $1.00 in your account, you will earn 5 cents in interest each year. The earned interest will be added to the principal amount you have in the account. If you take money out of the account before the date of interest accrual, you will not receive anything for the amount you withdraw.

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