||Ask Dr. Don
In search of a bank
Dear Dr. Don,
Is there any bank in New Jersey that offers daily compounded interest
for a savings account?
Finding a bank in New Jersey that will compound
interest daily on your savings account isn't a problem. I'm
just not sure why you have this as a goal.
You can shop
rates on Bankrate for CDs and money market accounts in your
area. The results will tell you the compounding method that the
bank uses for that type of account along with the annual percentage
In comparing two accounts with the same nominal interest
rate, the account that pays interest more frequently will have the
higher annual percentage yield. That's because when interest is
paid into the account, the interest payment starts earning interest
too, increasing the account's annual percentage yield.
Unless you have a lot of transactions in the account,
which cause the balance to fluctuate a lot, compare accounts on
the basis of annual percentage yield rather than by the compounding
method. A higher nominal rate with less frequent compounding can
be the better deal.
Don't lose sight of the monthly fees and minimum balance
requirements when deciding where to invest your money.
-- Posted: May 16, 2002