How to Calculate Interest on a Savings Account

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3 min
17-September-2025

A savings account is the most common way to keep your money safe while earning some interest. But the big question is—how much interest are you actually making on your balance? Understanding how banks calculate savings account interest can help you make smarter financial choices and grow your wealth more effectively.

For instance, while savings accounts offer basic returns, a Bajaj Finance Fixed Deposit can give you assured growth with rates up to 7.30% p.a., making it a stronger long-term option. Open FD.

Savings account interest

Savings accounts pay interest on the money you deposit. The interest is typically calculated daily but credited monthly or quarterly. There are two main types:

  • Simple Interest: Calculated only on your original deposit (principal).
  • Compound Interest: Calculated on your deposit plus accumulated interest, helping your money grow faster.

Unlike savings accounts where rates fluctuate, a Bajaj Finance FD locks in your returns for the entire tenure, shielding you from interest rate changes. Check latest rates.

Fixed Deposit

  1. Trusted by over 5 lakh customers
  2. Fixed Deposits worth more than Rs. 50,000 crore booked
  3. Rated CRISIL AAA/STABLE and [ICRA]AAA(STABLE)
  4. Up to 0.35% p.a. extra interest offered for senior citizens
  5. Flexible interest payout options available - Monthly, Quarterly, Half-yearly, Annually or at Maturity

By proceeding, you agree to our Terms and Conditions

How to calculate interest earned on a savings account

You can calculate savings account interest in two ways:

  • Simple Interest Formula:
    P × R × N
  • Compound Interest Formula:
    (P (1 + R)^N) – P

Where:

  • P = Principal balance
  • R = Interest rate (in decimal)
  • N = Time period (in years)

How much interest can you earn based on your balance?

The total interest depends on your balance and the rate your bank offers. Some banks provide tiered interest rates—higher balances earn better rates. Additionally, compounding can gradually increase your overall returns.

But if you want to grow faster, a Bajaj Finance FD offers competitive returns with flexible tenures ranging from 12 to 60 months. Book an FD and start earning.

Fixed deposit variants

Highest Credit Ratings | Trusted with over 1.4 million Deposits | Assured Returns on FD
Recommended

Fixed Deposit - 60 Months

INTEREST RATES UP TO
7.30% p.a.
Invest Online

Fixed Deposit - Senior Citizen

INTEREST RATES UP TO
7.30% p.a.
Invest Online

Fixed Deposit - Age below 60

INTEREST RATES UP TO
6.95% p.a.
Open FD

Fixed Deposit - Minor

INTEREST RATES UP TO
6.95% p.a.
Open FD

Fixed Deposit - HUF

INTEREST RATES UP TO
6.95% p.a.
Open FD

Fixed Deposit - Sole Proprietor

INTEREST RATES UP TO
6.95% p.a.
Open FD

Ways to earn more interest

Here are some smart ways to maximise your savings account returns:

  1. Explore high-yield savings accounts: Some banks offer better rates for higher deposits.
  2. Make regular deposits: Build your balance steadily to earn more.
  3. Leverage sweep-in and sweep-out: Link idle funds to an FD for higher interest.
  4. Opt for age-based accounts: Senior citizens often earn higher interest.
  5. Invest your interest income: Redirect it to SIPs or other investments.

Instead of relying only on savings account tweaks, consider parking your funds in a Bajaj Finance FD, which offers one of the highest FD rates in India—up to 7.30% p.a. for senior citizens. Start investing.

Also Read: Alternatives to a saving account

Conclusion

A savings account is perfect for liquidity and everyday banking, but its interest earnings are often modest. By learning how interest is calculated, you can optimise your savings—but if you want stable and higher returns, a Fixed Deposit is worth considering.

With Bajaj Finance FD, you get guaranteed growth, flexible payout options (monthly, quarterly, half-yearly or yearly), and the highest safety ratings (AAA/Stable by CRISIL & ICRA). It is a simple way to make your money work harder without market risks. Check eligibility.

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Frequently asked questions

Is my money safe in an online savings account?

Yes, online savings accounts are just as safe as traditional ones, though some may have more security features than others. Before opening an account with a bank, ensure that it has appropriate security measures in place to protect your finances, such as multi-factor authentication, encryption, or tokenisation.

What’s the point of saving when APYs are lower than the inflation rate?
While the interest rates on savings accounts do not always keep up with inflation, they still serve as a secure way to save money and make it accessible for future expenses or emergencies. Inflation may not be a huge concern for short-term goals, as savings accounts are great for holding cash for short-term liquidity needs.
Why do interest rates for online savings accounts trend higher than at brick-and-mortar banks?
Unlike traditional banks, one of the main advantages of online savings accounts is that they do not have to incur significant infrastructure and overhead costs. This allows them to pass on the savings to their customers, which translates into higher rates of interest.
Which is better for savings—FD or savings account?

A savings account gives you liquidity, but an FD offers guaranteed growth at higher interest rates. Many people keep daily-use money in savings and long-term funds in FDs. Explore FD options offered by Bajaj Finance and start earning up to 7.30% p.a. by investing through the Bajaj Finserv app or website.

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Disclaimer

As regards deposit taking activity of Bajaj Finance Ltd (BFL), the viewers may refer to the advertisement in the Indian Express (Mumbai Edition) and Loksatta (Pune Edition) furnished in the application form for soliciting public deposits or refer https://www.bajajfinserv.in/fixed-deposit-archives
The company is having a valid Certificate of Registration dated March 5, 1998 issued by the Reserve Bank of India under section 45 IA of the Reserve Bank of India Act, 1934. However, the RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

For the FD calculator the actual returns may vary slightly if the Fixed Deposit tenure includes a leap year.