6.5% APY savings account + $25 bonus if funded by 10/20

[abc]

hi hkchan. been awhile since my finance courses but ONLY a buck fidy difference? Let me dabble with something, please comment.

Monthly compounding is like $100 X .10 = $10.00 interest at the end of the month with end of month balance: 110.00

End of Month 2 is 110.00 X .10 = 11.00 interest = 121.00



Daily compounding is like $100 x .10 = $10.00 Interest on day 1.

Day 2 is $110.00 X .10 = $11.00 Interest

Day 3 is $121.00 X .10 = $12.10 Interest.

and on for 30 days.

Is my thinking not right?
The concept of Interest on Interest?

 

[MisterPotatoHead]

abc
He's talking about compounding interest. The difference is so small because you either A) make a few cents each day, and those few cents accumulate by the end of the month to earn SLIGHTLY more interest or B) your interest is issued at the end of the month, and it can help you earn more interest for the next month.

APY (Yearly) vs Rate (monthly):
So APY turns out to be more than the "rate" because they assume you will have money in your account that will accumulate interest, therefore allowing the interest to accumulate interest. In other words, you would make (in pcbanker's case) 6.25% of 100 bucks if you left that in there for the whole year. However, when it comes to the end of the month you only get interest computed by taking 6.06% (for the year), divided by 12 (to make it monthly)

To top it off, here's an explanation that you can't contest:

Let's say you have 100 bucks, and the bank has an APY of 6.25% and a "rate" of 6.06%. Every month, you gain 6.06% of your balance, divided by 12. These are slightly rounded.

Starting balance: $100
Monthly interest is computed by: <the current balance> x 6.06% divided by 12
1st month: gain .505 (giving you a balance of 100.505) (next month's computed interest includes the added interest from current month)
2nd month: gain .50755025 (giving you a balance of 101.01255025)
3rd month: gain .5101133787625 (giving you a balance of 101.522684037625)
4th month: gain .512689451
5th month: gain .51527853
6th month: gain .5178806896
7th month: gain .520495989
8th month: gain .52312449
9th month: gain .52576627
10th month: gain .52842139
11th month: gain .53109022121
12th month: gain .53377192383

Total gain = $6.25
End balance = $106.25

In this example, you are consistently taking 6.06% of the figure and dividing it by 12 to compute the monthly interest, however since the balance increases every month, the amount of interest increases, and the resulting APY (after a year) for this rate is 6.25% APY.

 

[hkchan]

abc,
The basic concept of compounding shown by your examples is correct, but what's your point?

BTW, your examples are &quot;screwy&quot; because in the monthly example you assumed a monthly rate of 10% (an interest rate of 120%) and in the daily example you assumed a daily rate of 10% (an interest rate of 3,650%). I would like to know where I can get these rates in an FDIC-insured account.

 

[RossMAN]

Has anyone signed up for an ING Direct account yet to receive their $25 bonus?

If so, did you apply online or print/mail your form?
If you applied online, did you have mail any forms in also how did you fund your account if you applied online?
How long did it take until your $25 bonus was credited to your account?

I'm interested in opening an ING Direct savings account but want to know the quickest, most effective and sure fire way of getting the account opened ASAP.

Ross

 

[freeman]

I called ING yesterday morning, was told the deal was over.

 

[Jedibus]

I was told the deal is good until the 20th.

I received their brochure after telling them that I was interested and there was one thing in the Terms and Conditions that made me curious. If you withdraw from your savings over 6 times in one month, the account becomes a &quot;Transactional Account.&quot; After calling a CS rep, I was told that nothing changes (i.e. you still get the 6.5 interest and that the &quot;Transactional&quot; status is over at the end of the month. So what's the point in renaming it I ask and basically it seems that they keep track of the number of times your account becomes &quot;Transactional&quot; and will probably cancel the account if you exceed 6 withthdrawals a month frequently. I'm still in!

Another thing, you need to send in your deposit on a personalized check. I will not have a personalized check in time so no $25 bonus for me.