Do You Forfeit accrued Interest Prematurely when Withdrawing Cash??

TBT | Feb 3, 2023 | 168 posts since 2018

With some savings banks you lose your interest if you completely close an account before the interest is posted. But what about the following scenario; Let's say that the bank posts interest at the end of the month, and you have $25K in your savings account from March 1st to March 29th. On March 29th you decide to withdraw $24K and leave only a $1,000 balance. Will the bank credit you the interest rate for those first 28 days that you had $24K in the account?? Or will you instead get a month of interest for just the $1,000 balance that is present at the time of posting on March 31st? A lot of banks talk about "compounding the interest daily" but they also don't show it applied to your balance daily either. Therefore it makes me wonder if that's just tricky legal talk, and you forfeited all that interest of $24K if it's not there when the bank posts on the 31st. (Like happens with some banks when you close the account before you let interest get posted.) I've never tested any of this, as I simply try not to withdraw large cash midway into the month.

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Answers

sams1985 | Feb 3, 2023 | 781 posts since 2022

Never had a situation where the full interest was not posted regardless of withdrawal amount or date. I've even had banks send me a check for the accrued interest if i close an account altogether.

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me1004 | Feb 3, 2023 | 1,379 posts since 2010

Well, I suppose it would depend on the bank. You would have to ask them, and read their disclosures about it. If you find any with disclosures saying nothing is psoted for any moinies withdrasn during the interst period, let us know. But I think most or all do that only if you close before interest is posted. In effect, they are saying the posting date prevails over the closure dare, and if there is no account any more on the posting date, there is no where to post that interest.

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MAKNYC | Feb 3, 2023 | 323 posts since 2015

I can’t imagine any scenario like the 24/1 you mention. There would be no way with any traditional type of account to pay interest on only the $1000. This is not even close to the other issue where interest not credited is lost due to account closure. That in itself is relatively rare, but it does happen. Similar to credit cards, every bank I know of uses the same basic methods for calculating interest due. They take the daily balance, multiply by the periodic interest rate (annual interest rate/360 or 365) and create a running tab of daily entries of interest due. The only differentiating factor is the compounding…whether they include the previously calculated daily interest due amounts ( but unpaid) in your daily balance or not.

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TBT | Feb 4, 2023 | 168 posts since 2018

I wondered if I can just ACH my cash out of a lower 3.75% APY bank at any time of the month I chose into a higher paying 4.25% APY bank account, and NOT feel like I have to wait until the end of the month for the interest to first post. (Then, at the start of the month I felt like I had to do the ACH quick, or wait all over again & try next month.) If I can initiate the ACH any time of the month without the worry that I’ve waited too long and am forfeiting accrued interest, then it’s the freedom to move my money faster into other banks who suddenly advertise new higher savings rates.
Me1004, to answer your input; “Well, I suppose it would depend on the bank. You would have to ask them, and read their disclosures about it”, I do read bank disclosures at sign-up, but they are general broad-brush compounding statements that do not specifically address my question.(I don't like to assume). I opted not to call and ask bank reps uncommon questions like this, as they may not understand my question or choose to guess with too easy a wrong "yes" or "no" .I trust the collective input here much better with what forum members have experienced. I figured if somebody here was done wrong, they’d let us know and probably mention the bank name too! lol

Thanks ladies & gents for your help.

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