If you have a savings account, you receive two types of interest: a basic interest and a loyalty premium. The base rate is proportional to the number of days that your money stays in the account. Every day counts and there is no other condition. But the fidelity premium only applies to credits that remain in your account for at least 12 consecutive months. If you withdraw your money before that due date, you will only receive the basic interest.
On your savings account
At the end of the year, the bank calculates the interest to which you are entitled. This detailed calculation is available for free, all you have to do is ask. You then see on how many days the interest was calculated, at what percentage and on what amount, depending on the deposits and withdrawals that you possibly made.
In practice, a bank uses the following formula to calculate the base rate: [capital x interest rate x number of days] / 365. You will notice that the basic interest is credited to your account at the beginning of January.
The loyalty premium, which you therefore receive after one year, is paid out at the start of the following quarter. So that’s four times a year. Bear in mind that the basic interest and loyalty premium are never fixed: the bank can change them at any time.
The interest on your loan
If you borrow money, the interest corresponds to the costs you pay for the loan amount. In other words: they are the remuneration that the bank pays for the service provided. How much interest you pay, of course, depends on the interest rate, the size of the amount and the duration of the loan. The parameters of all credit costs are bundled in the APR or “annual percentage rate”. This indicator is calculated in the same way by all banks, so that those looking for a loan can compare all offers transparently.
To calculate the amount of interest on a loan and the monthly installments, the bank also draws up a debit table. For the entire term and for each monthly installment, this specifies how much capital and how much interest the borrower repays and what loan balance is left after each monthly installment. The total amount of interest to be repaid is also stated. Since the interest is always calculated on the outstanding balance, the share of the interest in the total amount decreases as you pay off the loan.