Endless Gibberish

How much do you need to earn $0.01 in interest every month?

May 19, 2007 – 7:01 pm

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If you’re a financially savvy person, chances are you’ll have more than one savings account as rates move around. I started off at ING Direct when they were paying 4% or so. I then left them and moved to HSBC Direct for 5.05% and then now I’m considering moving to FNBO Direct for 6% (guaranteed until sept 28th).

Of course I could keep $1 in all the accounts I’m not using but I’ve heard that some banks like ING Direct will close inactive accounts with extremely low amounts in them. Rather I’m a OCD type person that likes to leave just enough money in the account so that I earn exactly $0.01 each month.

To figure out how much you’ll need to earn exactly $0.01 in interest every month we have to do some math. First we need to figure out the APR, since the APY is calculated with compounding. We then use the APR to figure out what amounts are exactly needed to earn $0.01 in your dormant savings accounts. The APR is based on interest being compounded monthly, not daily. According the Terms & Agreement of banks such as ING Direct, they use monthly compounding.

ING Direct
APY 4.5%, APR 4.409771280524222%
Amount needed: $2.72

HSBC Direct and Emigrant Direct
APY 5.05% APR 4.936751161676423%
Amount needed: $2.43

You can download APY to APR software for free at OCC website. You can also use Jonathan’s calculator at My Money Blog.