How to use the introductory rate savings comparison calculator
- Enter your starting deposit, the amount you add each month and the number of months to compare.
- Describe each account: a name, its intro rate, how many months the intro lasts, the rate after that, and an optional limit on the balance that earns the intro rate.
- Add up to four accounts. Use 0 intro months for an account that pays one steady rate.
- Read the ending balance, the interest earned and the gap to the best account for each one.
Formula
each month: interest = balance at the start of the month x yearly rate / 12
with a limit: interest = (min(balance, limit) x intro rate + the rest x rate after intro) / 12
new balance = balance + interest + monthly deposit
During the intro months the intro rate applies. After that every account earns its rate after the intro. The monthly deposit is added at the end of each month, so it starts earning in the next month.
An intro rate against a steady rate
Start with $10,000 and add $200 a month for 24 months. One account pays 5 percent for 6 months and 2 percent afterwards. The other pays a steady 3.5 percent. The intro account ends with $15,465.52, of which $665.52 is interest. The steady account ends with $15,688.49, of which $888.49 is interest.
The steady account finishes $222.97 ahead, even though the intro rate looked better in the first six months. A higher rate for a short time does not make up for a lower rate over the other eighteen. With a 60 month span the gap widens to $1,167.60, and even with a 12 month intro the steady account would still finish about $37 ahead.
Why introductory rates mislead
An account that promotes a high rate often pays it only for a few months, then drops to a lower one. The best comparison is the ending balance over the time you will actually leave the money there. This page does that arithmetic month by month, so you can see where the lines cross.
It also handles balance limits. Some accounts pay the high rate only on the first part of the balance, and the rest earns a lower rate. Enter the limit and the page splits the balance every month.
Making the comparison fair
Use the same starting deposit, monthly deposits and months for every account, which the page does by design. Rates here are examples you can change. Real accounts may change rates at any time, require conditions such as direct deposit to earn the top rate, or pay interest on a different schedule from monthly compounding.
To convert a stated rate to a yearly yield first, use the APY and APR Calculator. For one steady rate over many years, see the Compound Interest Calculator.
Assumptions and limits
- Interest compounds monthly at the yearly rate divided by 12, and each month's interest is based on the balance at the start of the month.
- The monthly deposit is made at the end of each month. The starting deposit is made at the beginning.
- Rates are fixed for the periods you describe. Real rates can change at any time.
- Taxes, fees, minimum balances and conditions for the intro rate are not modeled.
- Balances are shown to the cent while the arithmetic keeps full precision, and nothing typed here leaves your browser.
Frequently asked questions
What does the intro balance limit do?
It caps the part of the balance that earns the intro rate. Anything above the limit earns the rate after the intro for that month. Use 0 for no limit.
How many accounts can I compare?
From two to four. Each one needs a name, an intro rate, intro months and a rate after the intro. An account with no intro rate uses 0 intro months and the same rate in both rate boxes.
Why does the best account change when I change the number of months?
A short time favors the account with the higher intro rate, and a long time favors the account with the higher rate after the intro. Try several lengths to see where the winner changes.
Does this include the interest rate changes banks make?
No. It uses the rates you type for the whole period. If you expect a rate to change, split the comparison into two runs or enter a different rate after the intro.