1. What is Daily Interest?

Daily interest is the amount of interest earned or paid each day on a balance, calculated using the annual percentage rate (APR) divided by 365 days.

2. How Does the Calculator Work?

The calculator uses the daily interest formula:

Where:

• \( Balance \) — Current account balance in dollars
• \( APR \) — Annual Percentage Rate (as a percentage)
• 365 — Number of days in a year

Explanation: The formula converts the annual rate to a daily rate by dividing by 365, then applies it to the current balance.

3. Importance of Daily Interest Calculation

Details: Calculating daily interest helps understand how much you're earning on savings or paying on debts each day, which is crucial for financial planning and comparing financial products.

4. Using the Calculator

Tips: Enter your current balance in dollars and the APR as a percentage (e.g., enter 5 for 5%). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why divide by 365 instead of 360?
A: While some institutions use 360 days, dividing by 365 provides a more accurate daily rate for most personal finance calculations.

Q2: Does this account for compounding?
A: This calculates simple daily interest. For compound interest, the calculation would be more complex as it would include previously earned interest.

Q3: How does this differ from monthly interest?
A: Monthly interest would multiply the daily interest by approximately 30.44 days (365/12) or use a different compounding formula.

Q4: Can I use this for credit card interest?
A: Yes, this gives you the daily interest charge, but credit cards typically compound daily, so your actual charges may be slightly higher.

Q5: What if my APR changes during the year?
A: You would need to recalculate using the new APR for accurate daily interest from that point forward.