Is interest compounded monthly or daily better for a savings account?

Question

looking at bankrate.com i have notice that some banks offering similar rates have different methods of compounding interest, some are daily and some are monthly. which is more profitable?

Answer 1

It depends on the effective interest rate. Use the website below to convert the rate to an annualised rate and determine which is better.

Answer 2

Obviously daily interest would be more beneficial,  For example, you put $100 in the bank on the 10th of the month and you already have $100 in there.  Your interest would start paying from the 10th of the month on the full $200  rather than $200 at the end of the month,

Answer 3

daily

Answer 4

The most frequent compounding will work in your favour. (daily)

Most commonly, interest is "calculated" daily and compounded monthly.

Answer 5

It depends on the interest rate. All other things (like the interest rate) being equal, then daily is better. But if the interest rates are different, all bets are off.

The is why you should only compare the APY. The APY is based on both the interest rate and the compounding period. If you compare the APYs, then you are comparing apples to apples.