Capital One calculates interest on its savings accounts using a method called daily compounding. Here's how it works:
- Daily Balance: Capital One tracks the balance in your savings account each day. This includes any deposits, withdrawals, and the interest that has been earned.
- Daily Interest: The bank then calculates the daily interest by multiplying the daily balance by the interest rate and dividing it by 365 (the number of days in a year).
- Accumulation: The daily interest is accumulated over the course of the month. Capital One adds up all the daily interest amounts to determine the total interest earned for that month.
- Monthly Interest: At the end of each month, the bank adds the total interest earned to your savings account balance.
By using daily compounding, Capital One ensures that interest is continuously earned on the account balance and any previously accumulated interest. This can result in slightly higher interest earnings compared to simpler interest calculations, such as simple interest or monthly compounding.