Financial terms for non-financial peeps

[blunomore]

Please explain to me in plain English what it means when, in a savings account, interest is calculated daily and capitalised monthly.

Thanks

 

[Morgoth]

the interest rate is calculated on a daily basis, but you gain interest every month, basically it fluctuates every day and at number at the end of the month is what you will gain % wize.

 

[Pyro]

According to me: Basically, they take the average amount of money you had in your bank account for the month, and give you interest on that at the end of every month.

They calculate the interest daily, but only give you the actual money (capitalise) at the end of the month.

 

[blunomore]

the interest rate is calculated on a daily basis, but you gain interest every month, basically it fluctuates every day and at number at the end of the month is what you will gain % wize.

According to me: Basically, they take the average amount of money you had in your bank account for the month, and give you interest on that at the end of every month.

They calculate the interest daily, but only give you the actual money (capitalise) at the end of the month.

So if I put a large amount of money into an account and withdraw it again after a fairly short period of e.g. 2 weeks, would it benefit me in terms of the interest I will earn at the end of the month?

 

[Morgoth]

yes, lets say you deposite R100, after 2 weeks you withdraw R20 then your interest will be on R100 for the 1st 2 weeks, after that on R80 for the following 2 weeks but you only get it paid into your account after 1 month,

 

[Smurfatefrog]

So if I put a large amount of money into an account and withdraw it again after a fairly short period of e.g. 2 weeks, would it benefit me in terms of the interest I will earn at the end of the month?

Yes, as long as its costing you less from wherever you taking the money from

I had a client who used to transfer a few R100k at the beginning of every month from his business account into his personal bond & then transfer it back to the business account before month end, thereby saving himself interest & the interest paid by the business would be an allowable deduction

 

[blunomore]

Thanks for the answers guys.

Wish banking costs for the transfer between accounts did not exist at all !!

 

[Morgoth]

Thanks for the answers guys.

Wish banking costs for the transfer between accounts did not exist at all !!

its illegal to do constantly anyways afaik.

 

[blunomore]

its illegal to do constantly anyways afaik.

This is a once off.

 

[Pyro]

Just make sure bank costs aren't going to kill off any advantage you'll get from interest!

 

[mikef]

Please explain to me in plain English what it means when, in a savings account, interest is calculated daily and capitalised monthly.

Thanks

The term is actually literally what happens i.e. once a month interest, at the applicable rate, is calculated on each days closing balance for one day. The total for daily amounts since the last calculation are added together and added to your account (monthly compounding).

 

[blunomore]

Just make sure bank costs aren't going to kill off any advantage you'll get from interest!

That is what I fear, but I suspect the interest on the amount over 2 weeks will be more than the costs of transfers.