Question about Money Market account

[Azza]

Hi everyone!

I received an offer today to apply for a Money Market account through my bank. They state it has a 0.05% APY rate, and that interest compounds daily at 0.05%.

I am trying to understand. So if I deposited $5,000 and sat on it for a year, would I have $5,092 or $6,000?

Thank you!

[Brian_Earl_Spilner]

[Brian_Earl_Spilner]

In comparison, my DCU savings with a cap of $1000 earns just over $3 a month at 6.17%

[AllZero]

I would recommend high yield checking or savings account.

https://ficoforums.myfico.com/t5/Personal-Finance/CU-s-to-join-for-Savings-Rate-now-and-possible-Cre...

[Azza]

That's not very much...

What, er, why is the daily rate stated as 0.05% and the APY is also 0.05%? If interest is compounding daily, wouldn't that mean 0.05% against the principal each day 365 times? 

[M_Smart007]

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@AllZero wrote:
I would recommend high yield checking or savings account.

https://ficoforums.myfico.com/t5/Personal-Finance/CU-s-to-join-for-Savings-Rate-now-and-possible-Cre...

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+1

[Revelate]

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@Azza wrote:

That's not very much...

What, er, why is the daily rate stated as 0.05% and the APY is also 0.05%? If interest is compounding daily, wouldn't that mean 0.05% against the principal each day 365 times? 

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It doesn't.  Mathematical formula if your curious is here:

https://www.investopedia.com/terms/c/compoundinterest.asp

[Anonymous]

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@Azza wrote:

That's not very much...

What, er, why is the daily rate stated as 0.05% and the APY is also 0.05%? If interest is compounding daily, wouldn't that mean 0.05% against the principal each day 365 times? 

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The 0.05% is not the daily rate,  but the  APR. The APR is the annual rate not counting compound interest. The APY  is the annual  rate including compound interests. Since the interest rate is so small, the daily compounded interest earned on $5000 in one year is only  0.06 cents, which is then rounded to 0.  So you are not earning any compound interest. Hence the  APR and the APY are  both  equal to 0.05%.

The daily rate is APR/365=0.05%/365=0.00013...%

[Ragdollkitty]

That list of good rates from CU's is great. I personally am using the DCU and Service CU deals.

If you're a T-Mobile customer, the TMobile Money a checking they promote from Bankmobile pays 3% on up to $3k and 1% on amounts over. 1% flat for non TMobile customers or those that don't meet deposit requirements for the month ($200 every month), which still isn't bad.

The Patriot Bank Online Money Market is still at 1.40% as of today where many dropped their rates already July 1 (another online bank I was looking at 1.36% last week and already dropped to 1.06%).