At Iban interest is paid daily. Over the course of the year you will receive daily interest instalments that will add up to the projected AER.

We calculate the daily interest by raising the AER to the power of 1/365 (AER ^ (1/365)). This is the formula that we use:

Daily Interest = [Current Balance] x ( ( (1 + AER) ^(1/365) ) - 1 )

Let's say you deposit 10,000€ on your Iban Account, which has an interest rate of 2.5%. How much daily interest are you going to earn?

Day 1

Daily Interest =  € 10,000 x ( ( (1 + 2.5%) ^(1/365) ) - 1 ) =  € 0.67

Updated Account Balance = € 10 000.67

Total Interest Earned = €  0.67 *

Day 2

Daily Interest = € 10,000.67 x ( ( (1 + 2.5%) ^(1/365) ) - 1 ) = € 0.67 *

Updated Account Balance = € 10 001.35

Total Interest Earned = € 1.35 *

...

Day 365

Daily Interest = € 10,249.30 x ( ( (1 + 2.5%) ^(1/365) ) - 1 ) =  € 0.69 *

Updated Account Balance = 10250

Total Interest Earned = € 250

*Note: We only show the first two decimals on daily interest, but our calculations always take into account all decimals.

After 365 days have passed you will have earned 250€ in interest and your account will have reached the 2.5% projected AER (assuming no further deposits or withdrawals were made).

You can also see that daily interest payments are increasing over time. That is because Iban pays compound interest (except on Iban Dynamic). Which means that every time we pay interest, we will calculate that interest based on your total balance (for that product) including interest that you have already earned.