The mechanism of calculating compound interest is called deposit capitalization. This option allows you to calculate interest not only on the principal amount of the deposit, but also on previously paid interest, due to which the profitability of the deposit gradually increases.
Let's look at the difference between deposits with and without capitalization using a simple example. Let's assume that a client wants to place 1 million rubles at a rate of 16%.
If the depositor chooses a deposit with simple interest, his profit for the year will be 160 thousand rubles: that is, the average monthly income will be about 13,333 rubles.
However, if the client chooses a deposit at the same rate, but exit mobile number database with monthly interest capitalization, the income amount will increase. For the first month, he will receive interest in the amount of 13,114.75 rubles. In the following month, interest will be accrued on the amount of 1,013,114.75 rubles and will already be 13,745.42 rubles. As a result, for 12 months of the deposit with capitalization, the client will receive a profit of 172,203 rubles, which is significantly more than the interest on the deposit without capitalization.
Capitalization has different periods - time intervals after which interest is accrued. Therefore, it comes in several types:
Daily is the most profitable type of capitalization, but banks offer it extremely rarely. In this case, interest on the deposit funds is accrued and added to the principal amount daily. That is, each subsequent day the bank accrues interest on an increasingly larger amount than the previous one.
Monthly — standard capitalization option for short-term and medium-term deposits (from 3 to 12 months). Interest is accrued and summed up with the principal amount of funds on the deposit at the end of each month.
Quarterly, semi-annually, annually - these options for calculating compound interest are typical for long-term deposits (2-3 years or more). The mechanism for their payment is absolutely the same, the only difference is in the time intervals.