1

I have opened a savings account at a credit union and deposited $100. Every month my account tells me I've received $0.02 in interest, and that my deposit dividend is 0.250% and my APY earned is 0.23% or 0.22% (it's not the same every month). Thus, after three months I've earned $0.06 and my balance is $100.06.

Please help me understand:

  • 0.250% of what? Because $100 x 0.25% = $25. How am I getting $0.02 a month?
  • Is this most likely a simple (as opposed to compound) interest rate? What is typical of credit unions?
  • If I make additional deposits into this savings account from time to time, how can I calculate total interest earned up until today, and also up to an arbitrary point in the future, such as eight months from now? I want to do this in Google Sheets. I have a column of all my deposits, and I need a cell to calculate the sum of all my deposits plus interest earned. For example, I want one cell to calculate that $100.06 is my current balance plus interest, and I want another cell to calculate that (perhaps) $100.22 will be my balance in eight months.

Thank you!

7

0.250% of what? Because $100 x 0.25% = $25. How am I getting $0.02 a month?

You're confusing "25%" (twenty-five percent) with "0.25%" (one quarter of one percent).

Your credit union is making interest payments twelve times per year. Your yearly interest rate is 0.25%. Divide that by 12 to give the monthly interest rate: 0.0208333%.

So, if you have $100 in the bank, then at the end of the month, you'll get an interest payment of $100 X 0.0208333% = $0.0208333. That gets rounded off to simply $0.02.

To put this in a spreadsheet, you could do something like this, where the first row is "initial conditions", and each other row represents one month worth of activity.

  • Cell A1 (initial balance): $100
  • Cell B1 (interest rate): 0.25%
  • Cell A2 (first month balance): =A1
  • Cell B2 (first month interest): =A2*$B$1/12 [balance times monthly rate]
  • Cell A3 (second month balance): =A2+B2 [last month's balance plus newly-earned interest]
  • Cell B3 (second month interest): A3*$B$1/12

Remaining rows can be copy/pasted from row C. (The formulas stay the same except that the relative references will get shifted).

  • +1 for this answer. 0.25% of $100 = 100 * 0.0025 – Ben Miller Aug 4 '17 at 3:00
  • Thanks! Somehow I misunderstood that percentage. However, I would like to have one formula in one cell calculate the interest. Is there some special function for this? Or a script? – grgoelyk Aug 4 '17 at 5:33

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.