1. What is Daily Interest?

Daily interest is the amount of interest that accrues on a balance each day based on the annual percentage rate (APR). It's commonly used in credit cards, loans, and savings accounts to calculate daily interest charges or earnings.

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 days, then applies it to the current balance.

3. Importance of Daily Interest Calculation

Details: Understanding daily interest helps consumers estimate interest charges on debts or earnings on savings, allowing for better financial planning and debt management.

4. Using the Calculator

Tips: Enter your current balance in dollars and the APR as a percentage (e.g., enter 15 for 15%). All values must be valid (balance > 0, APR ≥ 0).

5. Frequently Asked Questions (FAQ)

Q1: Why divide by 365 instead of 360?
A: Most modern financial institutions use 365 days for daily interest calculations, though some may use 360 days (which would result in slightly higher daily interest).

Q2: Does this account for compound interest?
A: This calculates simple daily interest. For compound interest, the calculation would need to account for interest being added to the principal periodically.

Q3: How accurate is this for credit cards?
A: This provides a good estimate, but actual credit card interest may vary slightly depending on the billing cycle and when payments are applied.

Q4: What's the difference between APR and APY?
A: APR doesn't account for compounding, while APY (Annual Percentage Yield) does. For daily compounding, APY would be slightly higher than APR.

Q5: Can I use this for savings accounts?
A: Yes, this works for both interest charged on debts and interest earned on savings, though savings accounts often use compound interest.