Accounts
How is interest calculated and settled on our interest-bearing accounts?
Let's begin by reviewing some terms.
We know that there are times when financial language, however accurate it may be, doesn't reflect the way ordinary people speak. So, first of all, we're going to clarify the terms and concepts used in the calculation and settlement of interest on interest-bearing accounts so that you're clear about how it works.
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Value date: This is the effective date of the item in your account, which will be used to calculate interest.
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Accounting date: This is the date on which the transaction is recorded, i.e. the day on which the credit or debit appears in your account. This date does not necessarily have to coincide with the value date. A simple example: If you perform the transaction on a holiday, the accounting date will be the next business day and, in the case of a debit, the value date will be the same day as the holiday.
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Settlement period: This is the agreed period for calculating and settling the interest on your account. It may monthly, half-yearly, etc.
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Daily balance value: At Bankinter we use the daily balance value to settle interest on our interest-bearing accounts.
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Maximum interest-bearing balance: The maximum interest-bearing balance is €10,000. This means that if the the balance in the account is higher (e.g.: €13,000), the credit numbers would be calculated with the maximum interest-bearing amount (€10,000).
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Credit values: The commercial numbers are calculated according to the daily value balances. These are the amounts we'll use to calculate the interest. The first step is to multiply the value balance by the number of days the balance has been held in the account. The result is divided by 100. For example: (balance of €100 x 7 days)/100 = 7
Now we'll explain step by step how we carry out the settlement and pay you interest on your account.
1. We then select the transactions.
We select the transactions with accounting dates in the settlement period, including those performed on the first and last days. We then sort the selected transactions by value date.
2. Let's calculate the daily balances of the interest-bearing account.
We'll use the balance value at the end of the day.
3. We start by calculating the credit numbers.
We use the previous balances to calculate the credit numbers, which is the information we'll use to perform the settlement.
4. Lastly, we calculate the interest to be paid.
To calculate the amount of interest, we first multiply the commercial numbers by the nominal interest rate. Next, we divide the result by 365 or 366 in the case of a leap year.
Want to see an example? Here are two: These examples show you how easy it is to calculate the interest on an interest-bearing account
4.94% NIR
10.000€
10.000€
(€10,000 balance x 10 days)/ 100 = 1,000
1,000 x 4.94 (interest rate) / 365 (days a year)
1,000 x 4.94/3650 = €13.56
4.94% NIR
10.000€
12.000€*
(€10,000 balance x 10 days)/ 100 = 1,000
1,000 x 4.94 (interest rate) / 365 (days a year)
1,000 x 4.94/3650 = €13.56
*Although the balance during those 10 days was €12,000, the maximum interest-bearing balance is set at €10,000 in the account terms and conditions. If you look at the examples, you'll see that the interest payable is the same in both cases.