Step by step
- Turn the rate into a decimal: 2% is 0.02.
- Interest each day: balance × rate ÷ 365
- Interest for a month: add up each day's interest. With the same balance all month, that's the daily amount × the number of days.
- The month's interest is added to your balance, so next month you earn a little more.
Example
$8,000 at 1.5%, for a 30-day month:
- Each day: $8,000 × 0.015 ÷ 365 = $0.329
- For the month: $0.329 × 30 = $9.86
- For a year, with the interest added each month: about $120.90