Where Can I Find the Best Interest Rates?

Places to find interest rates. Try getting several quotes at the following places:

  1. Get multiple quotes here, Enter State:

  2. contact your local bank

How do I get Higher Interest Rates on My Savings Accounts?

One way to get more interest at your bank is to ask for it. Banks will often have two different rates for money market accounts or checking accounts or certificates of deposit. They have the regular rate and the promotional rate which is higher. Just go to the bank and ask if they will pay you the promotional rate. If you have a lot of money on deposit you have more influence at the bank and are more likely to get the higher rate. It doesn’t hurt to ask.

You can also ask someone to look over your accounts and see if you qualify for more interest. For example, I found out that I qualify for free checking because I keep at least $1,000 in my checking account, I’m over 50 and I have my paycheck directly deposited in my checking account. I qualify for the free checking account, monthly interest on the money in may account, free checks, free money orders and free travelers checks. All this doesn’t amount to a great sum of money, but it is better than a poke in the eye with a sharp stick.

This page may be helpful.

What is the Formula for Calculating Compound Interest?

P = principal amount (initial investment)
r = annual interest rate (as a decimal)
n = number of times the interest is compounded per year
t = number of years
A = amount after time t

Just plug in the amounts and solve for A. Be sure to express the interest rate as a decimal.

Let’s say you put $2,000 in a bank CD at an interest rate of 3.5% compounded quarterly. How much will you have after five years?

What is Simple Interest?

Simple interest is earned or paid on the principal amount only. You don’t pay or get interest on your interest, just on the principal. Simple interest is not widely used in the world of business and personal finance. Mostly it is compound interest that is used. (see below).

There is a simple formula to figure out simple interest as follows:

I = Prt. Interest equals principal times the interest rate times the period of time.

Here’s an example. You borrow $1,000 for a year at a rate of 6%. If you plug these figures into our formula, then here’s what you get: Interest = ($1,000) X (.06) X (1). In English this is: Interest equals $1,000 times 6% times one year. Your answer is $60.

You may have to tweak the time element if it is not in increments of one year. For example, if you want to figure the interest for nine months instead of a year, then you would use .75 for the time component. If you wanted to figure the interest for a year and a half, then you would use 1.5 for the time component.

It doesn’t matter if this is simple interest you are paying (such as taking out a loan) or simple interest you are getting (such as investing in a bank CD), the simple interest is figured the same way. You just pay on the principal – the original amount borrowed or invested.

What is Compound Interest?

Compound interest is when you get interest on your interest. It doesn’t matter if you are paying interest or earning interest, the concept is the same. Compound interest is the method widely used in business and personal finance.

Here is an example:

Let’s say you put $1,000 in the bank at an interest rate of 4%. At the end of the year you would have $1,040 (your original $1,000 principal plus your $40 interest). Now you start getting compound interest so at the end of the second year you would have $1,082. Notice how you got more interest the second year? That’s because you got interest on your first year’s interest as well as interest on your principal. The amount you get in interest gets larger every year as you get interest on your interest. At the end of 10 years you would have $1,480.24. Where did the extra $80.24 come from? That’s the interest on your interest.

What happens if your interest is added to your principal more frequently, let’s say every month? In this case, there would be more interest because you would start getting compound interest at the end of each month instead of at the end of the year. The compound interest would grow faster.

What happens if the interest is added (compounded) every day? The interest would grow faster yet. That’s why it’s important to find out how frequently the interest is compounded. The more frequently interest is compounded, the more interest there is. It doesn’t matter if you’re paying interest or earning interest, compound interest is the usual method of figuring, and this makes interest grow faster.

What is APY?

APY is the Annual Percentage Yield, and is similar to APR. Except APY refers to interest you get instead of interest you pay. It is a way for the investor to determine the actual rate of return and compare different investment products.

Here is an example:
One bank is offering certificates of deposit paying 6%. Another bank is only offering 5.9%. Which is the better deal? It depends on the APR which they must reveal to you.

It seems the first bank is not compounding the interest. It is only paying simple interest of 6%, so at the end of the year you have $106. The second bank is compounding your interest monthly, so at the end of the year you have $106.06. The first bank had an APY of 6%, but the second bank had an APY of 6.06%. Not a vast difference, but you see the concept. Over a period of many years, these small differences can add up, and that is why knowing your APY is important.