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URL:  http://boards.fool.com/yfool-as-i-said-in-an-earlier-reply-i-dont-know-10161853.aspx

Subject:  Re: Quicken's Rate of Return incorrect Date:  4/23/1998  12:42 PM
Author:  Radish Number:  483 of 3689

yFool,

As I said in an earlier reply, I don't know of any banks that use annual compounding on savings accounts. I just have to use annual compounding because that's what Quicken uses (at least, that's what their help text says they use). Also, banks don't pay 200% interest, the large number just serves to highlight the problem in Quicken.

But in a more general sense, the answer to your question is yes. Typically, banks use continuous, daily, or monthly compounding on savings accounts and similar accounts. When the compounding is monthly, they generally say that "interest is accrued daily and compounded monthly". That means if you opened an account, then closed is half a month later, you would still have earned 15 days (or so) of accrued interest. If the interest rate was, say, 6%, then you'd get about 6%