Calculating monthly interest on a daily accrual basis

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steeped

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I have a quick question regarding how to calculate monthly interest on a daily accrual basis.

In a scenario where I have a balance as such:

August 1: Ending day balance is $0
August 10: Ending day balance is $0
August 20: Ending day balance is $50
August 21: Ending day balance is $20
August 31: Ending day balance is $70

To calculate my interest for the month of August, would the math be:

Balance was $50 for 1 day, so 1/31*50 = 1.61
Balance was $20 for 10 day, so 10/31*20 = 6.45
Balance was $70 for 1 day, so 1/31*70 = 2.26

This equals 10.32, and I'm charged 1% of this amount, which would be $0.10

Is this correct?
 
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Amount gained from interest depends on the interest percentage.
 
steeped said:
I have a quick question regarding how to calculate monthly interest on a daily accrual basis.

In a scenario where I have a balance as such:

August 1: Ending day balance is $0
August 10: Ending day balance is $0
August 20: Ending day balance is $50
August 21: Ending day balance is $20
August 31: Ending day balance is $70

To calculate my interest for the month of August, would the math be:

Balance was $50 for 1 day, so 1/31*50 = 1.61
Balance was $20 for 10 day, so 10/31*20 = 6.45
Balance was $70 for 1 day, so 1/31*70 = 2.26

This equals 10.32, and I'm charged 1% of this amount, which would be $0.10

Is this correct?
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The way I have seen it done FOR PAYING INTEREST ON AN ACCOUNT is just as you have it but presented a slightly different way. That is, your average balance for the month would be 10.32 [assuming your numbers are correct] and you would be paid $0.10 [if you could find a bank to pay that amount].

How-so-some-ever, banks (and other lending institutions) can levi service charges depending on the contract you signed so, for example, there may be a minimum $1 charge and you would be billed $1.
 
Don't you just add up the total amount of money affected by interest, at the end of every day, then multiply that amount by the interest rate? 10 cents is way too low, considering your interest on the day you have $50 is already 50 cents. Also, are withdrawing how much you gained on interest every day?
 
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