Simple interest, compound interest, which are not difficult for most people. It is simple because the principal amount is usually fixed in calculations.

In reality, the amount will change over time (i.e. customers may deposit or withdraw money from their account at any time). How does a bank usually calculate interest for their customers when the principal amount changes over time?

Is there any such formula?

Edited July 31, 20223 yr by kenny1999

Some of them calculate it daily on the lowest balance of the day (i.e. a deposit is credited to the next day for such calculations)

19 hours ago, swansont said:

Some of them calculate it daily on the lowest balance of the day (i.e. a deposit is credited to the next day for such calculations)

Lowest balance of the day? That sounds make sense. Any other kinds of calculation commonly used by bank?

Average daily balance.