I want to compare two saving accounts with same APY, but one has interest "compounded daily and credited monthly" and the other has interest "compounded monthly and credited monthly". Which will yield greater interest after a year if I make a deposit of a certain amount to the account every week in that year?
Question 1 (directly related to my question above): If the interest is compounded monthly, what is the principal for a month if I deposit or withdraw a few times during that month? Is it the average daily balance of that month?
Question 2 (not directly related to my original question): Does the frequency of crediting interest affect APY, assuming the same APR and compounding frequency? I guess not. The interest is earned after each compounding, but it may not be credited to your account immediately, as it is often too small. However, the interest you earned on that day (assume daily compounding) will be included in the principal to generate the interest for the next day. Is my understanding correct? If so, then no matter when you get the interest, the interest is always helping you earn more interest.