Help me understand and calculate credit union interest in Google Sheets

Question

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!

Answer 1

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).