Do banks give us interest even for the money that we only had briefly in our account?
It depends on your bank's terms (which may in turn be influenced by laws and regulations), but most banks calculate interest on a per-day basis, so if you leave the money in the account for more than a day, it will generate interest. However, it will most likely be so little that you could make more money doing any kind of paid work in the time it took you to write this question... Ditto @MichaelBorgwardt Just to get concrete: I just checked one bank in India and they say they are paying 4% on savings accounts. I don't know what you're getting or if 4% is typical in India, but it's at least an example. So if the bank pays interest based on average daily balance, and you left the money in the bank for a week, you'd get 4%/52 = .077%. So on Rs 95,000 that would be Rs 73. I live in the US where typical interest on a savings account today is about 1%. So an equivalent amount of money -- I think that would be about $1,500 -- would get 1/52 of 1%, or 29 cents.  Don't leave the lights turned on while you do the calculations -- you'll spend more on the electricity than you make on the interest. :-) ** Addendum ** This suddenly reminds me ... I read a news story a few years ago about a man who was expecting a tax refund check from the IRS of a few hundred dollars, and when the check arrived it was for several million. Well obviously it was a mistake. But he came up with the clever idea: Deposit the check in an interest-bearing account. Promptly contact the IRS, inform them of the mistake, and ask how and where to go about returning the money. Hope that it takes at least a few days for them to figure everything out. Then keep the interest accumulated on the several-million dollars for the time that he had the money. And as he contacted them immediately about the error, they can't say he was trying to hide anything. It was a nice try, but it didn't work. They demanded he send them the interest as well as the principle. As mentioned in other answers the interest you make is negligible and the calculations would depend on the bank. In saying that the general trend is calculate daily, pay monthly.  A typical scenario would be that every night at midnight the interest for your account at that point in time is calculated. This occurs every midnight and at the end of the month the sum of those calculations will be added to your account. You could have had several significant transactions pass through your account in one day although if the interest is calculated at a specific point in time some transactions may not contribute to any interest. These calculations are worth thinking about,  even in circumstances of negligible returns, as it could assist when considering combining credit cards with home loan offset accounts so it is not a complete waste of time to understand how interest is calculated. The more you know ;) "The other answers demonstrate that you'll receive a paltry amount of money in two days, by comparing to things like wages, the cost of electricity, etc. But the real point is you're incurring risk by paying late, in particular, the realistic risk of the post office messing up. That's not worth it, and it's this kind of overhead that people usually mess up when trying to optimize their finances. (More commonly, it's ""I can save 5 cents by doing this, but there's about a 400% chance I'm going to mess everything else up since I don't have infinite mental bandwidth). You asked a good and important question, but for your actual situation I must emphasize it's terrible personal finance to risk dropping your books for a superficial optimization."
Very little, as you expected. The CD locks the rate in, meaning you get the rate for sure. The savings account can change any day, so it could fall below the CD's rate. Chances are small, obviously, but it is theoretically possible. If you pay attention, if this happens, you could simply moving it to a CD then (if it is still offered). People with little understanding that want 'security' might be suckered into buying a CD; or there could be versions offered where all the interest comes on the last day (so you delay taxes). Most 0% interest loans have quite high interest rates that are deferred. If you are late on a payment you are hit with all the deferred interest. They're banking on a percentage of customers missing a payment.  Also, this is popular in furniture/car sales because it's a way to get people to buy who otherwise wouldn't, they made money on the item sale, so the loan doesn't have to earn them money (even though some will). Traditional banks/lenders do make money from interest and rely on that, they would have to rely on fees if interest were not permitted. "This will happen automatically when you open an interest-bearing account with a bank.   You didn't think that banks just kept all that cash in a vault somewhere, did you?  That's not the way modern banking works.   Today (and for a long, long time) banks will keep only a small fraction of their deposits on hand (called the ""reserve"") to fund daily withdrawals and other operations.  The rest they routinely lend out to other customers, which is how they pay for their operations (someone has to pay all those tellers, branch managers, loan officers) and pay interest on your deposits, as well as a profit for their owners (it's not a charity service).  The fees charged for loan origination, as well as the difference between the loan interest rate and the deposit rate, make up the profit.   Banks rarely hold their own loans.  Instead, they will sell the loans in portfolios to investors, sometimes retaining servicing rights (they continue to collect the payments and pass them on) and sometimes not (the payments are now due to someone else).  This allows them to make more loans.   Banks may sometimes not have enough capital on hand.  In this case, they can make inter-bank loans to meet their short-term needs.  In some cases, they'll take those loans from a government central bank.  In the US, this is ""The Fed"", or the Federal Reserve Bank.   In the US, back around the late 1920's, and again in the 1980's some banks experienced a ""run"", or a situation where people lost confidence in the bank and wanted to withdraw their money.  This caused the bank to have insufficient funds to support the withdrawals, so not everyone got their money.  People panicked, and others wanted to take their money out, which caused the situation to snowball.  This is how many banks failed.  (In the '80s, it was savings-and-loans that failed - still a kind of ""bank"".)  Today, we have the FDIC (Federal Deposit Insurance Corporation) to protect depositors.  In the crashes in the early 2000's, many banks closed up one night and opened the next in a conservatorship, and then were literally doing business as a new bank without depositors (necessarily) even knowing.  This protected the consumers.  The bank (as a company) and its owners were not protected." What is much more likely is immediate or close to immediate investment.  but this is exactly my point of contention with how they do things. I know for a fact that the money is immediately invested, which is why i find it wrong that interest for money collected in a given financial year is announced after the end of the next financial year.  i was wondering if this was a common practice in other countries. NO.  The legislation requires the landlord to deposit it in a bank.  Check out pages 7-10 of the linked document.  There is no mention of interest. The second clause, I believe, is probably for large landlords who hold hundreds of thousands of dollars of security.   http://www.legislature.mi.gov/documents/publications/tenantlandlord.pdf Q4 Once collected, what must the landlord do with the security deposit?   The landlord must either: a) Deposit the money with a regulated financial institution (e.g.,   bank), OR b) Deposit a cash bond or surety bond, to secure the entire deposit,   with the Secretary of State. ( Note: If the landlord does this, he or   she may use the money at any time, for any purpose.) The bond ensures   that there is money available to repay the tenant’s security deposit "As to where the interest comes from: The same place it comes from in other kinds of savings accounts. The bank takes the money you deposit and invests it elsewhere, traditionally by lending it out to others (hence the concept of a ""savings and loan"" bank). They make a profit as long as the interest they give for ""borrowing"" from you, plus the cost of administering the savings accounts and loans, is less than the interest they charge for lending to others. No, they don't have to pay you interest -- but if they didn't, you'd be likely to deposit your funds at another bank which did. Their ideal goal is to pay as little as possible without losing depositors, while charging as much as possible without losing borrowers. (yeah, I know, typo corrected) Why do they get higher interest rate than they pay you? Mostly because your deposits and interest are essentially guaranteed, whereas the folks they're lending to may be late paying or default on those loans. As with any kind of investment, higher return requires more work and/or higher risk, plus (ususally) larger reserves so you can afford to ride out any losses that do occur." Maybe there's more to this story, because as written, your sister seems, well, a little irrational. Is it possible that the bank will try to cheat you and demand that you pay a loan again that you've already paid off? Or maybe not deliberately cheat you, but make a mistake and lose track of the fact that you paid? Sure, it's POSSIBLE. But if you're going to agonize about that, what about all the other possible ways that someone could cheat you? What if you go to a store, hand over your cash for the purchase, and then the clerk insists that you never gave him any cash? What if you buy a car and it turns out to be stolen? What if you buy insurance and when you have a claim the insurance company refuses to pay? What if someone you've never met or even heard of before suddenly claims that you are the father of her baby and demands child support? Etc etc. Realistically, banks are fanatical about record-keeping. Their business is pretty much all about record-keeping. Mistakes like this are very rare. And a big business like a bank is unlikely to blatantly cheat you. They can and do make millions of dollars legally. Why should they break the law and risk paying huge fines and going to prison for a few hundred dollars? They may give you a lousy deal, like charge you outrageous overdraft fees and pay piddling interest on your deposit, but they're not going to lie about how much you owe. They just don't. I suggest that you not live your life in fear of all the might-be's. Take reasonable steps to protect yourself and get on with it. Read contracts before you sign, even if the other person gets impatient while you sit there reading. ESPECIALLY if the other person insists that you sign without reading. When you pay off a loan, you should get a piece of paper from the bank saying the loan has been paid. Stuff this piece of paper in a filing cabinet and keep it for years and years. Get a copy of your credit report periodically and make sure that there are no errors on it, like incorrect loan balances. I check mine once every year or two. Some people advise checking it every couple of months. It all depends how nervous you are and how much time you want to spend on it. Then get on with your life. Has your sister had some bad experience with loans in the past? Or has she never borrowed money and she's just confused about how it works? That's why I wonder if there's more to the story, if there's some basis for her fears. Most cooperative banks are insured upto Rs 1,00,000/- .  It depends on what is the current status of the Bank and withdrawal of the funds would be based on the decision taken by the administrator. There maybe no interest payable, it would again be decided by the administrator. The Bank have risk. In goods, thrre are two profiles, essentially it can be convenient and hence the usage, pay off monthly or spending future earnings today for luxury. The way cash advance is seen, emergency, ran out of cash in foreign/remote location... Debit cards not working etc. One generally needs small amount of cash. The other segment is loss of income. Essentially I have run out of cash and I need to borrow. This is additional risk and hence is limited or curtailed. If so, it seems to me that this system is rather error prone. By that I mean I could easily forget to make a wire some day and be charged interests while I actually have more than enough money on the check account to pay the debt. I have my back account (i.e. chequing account) and VISA account at/from the same bank (which, in my case, is the Royal Bank of Canada). I asked my bank to set up an automatic transfer, so that they automatically pay off my whole VISA balance every month, on time, by taking the money from my bank account. In that way I am never late paying the VISA so I never pay interest charges. IOW I use the VISA like a debit card; the difference is that it's accepted at some places where a debit card isn't (e.g. online, and for car rentals), and that the money is deducted from my bank account at the end of the month instead of immediately. I don't think this is a French thing.  It's like this everywhere.  Banks always want people to open accounts of every type.  A person with a checking account should be easy to sell on a savings account at the same institution. Given that it does not appear that they will have any chance to recover the money they spend to get customers to open these accounts (there are no fees and they have to pay out the interests, even if very small) Oh, they recover it.  Banks make money by having deposits that they can use to lend out.  They do pay interest on deposits, but not as much as they earn on your money.  If they persuade you to have a savings account in addition to your checking account, then you might find it convenient and then move your money out of a different institution into their savings account.  Or you might stop hoarding it under your mattress.  Or whatever.  More money in their accounts means more profit for them. I don't know whether banks make more profit per dollar in savings or checking accounts.  I see banks pushing for both.  I think they simply view more accounts as a good thing because it can lead to more total savings in their institution.  That's how they make money. This is very much possible and happens quite a lot. In the US, for example, promotional offers by credit card companies where you pay no interest on the balance for a certain period are a very common thing. The lender gains a new customer on such a loan, and usually earns money from the spending via the merchant fees (specifically for credit cards, at least). The pro is obviously free money. The con is that this is usually for a short period of time (longest I've seen was 15 months) after which if you're not careful, high interest rates will be charged. In some cases, interest will be charged retroactively for the whole period if you don't pay off the balance or miss the minimum payment due. Yes.  In the US these are called certificates of deposit or savings accounts.  Every run-of-the-mill bank offers them.  You give the bank money and in return they pay you an interest rate that is some fraction of or (negative) offset from the returns they expect to make from your money. Since most investments that a bank makes (say, loaning money to a local business) are themselves based on some multiple of or (positive) offset from the prime rate, in return the interest rate that they offer you is also mathematically based on the prime rate. You can find lists of banks offering the best returns on CDs or savings accounts at sites like BankRate. "With (1), it's rather confusing as to where ""interest"" refers to what you're paying and where it refers to what you're being paid, and it's confusing what you expect the numbers to work out to be. If you have to pay normal interest on top of sharing the interest you receive, then you're losing money. If the lending bank is receiving less interest than the going market rate, then they're losing money. If the bank you've deposited the money with is paying more than the going market rate, they're losing money. I don't see how you imagine a scenario where someone isn't losing money. For (2) and (3), you're buying stocks on margin, which certainly is something that happens, but you'll have to get an account that is specifically for margin trading. It's a specific type of credit with specific rules, and you if you want to engage in this sort of trading, you should go through established channels rather than trying to convert a regular loan into margin trading. If you get a personal loan that isn't specifically for margin trading, and buy stocks with the money, and the stocks tank, you can be in serious trouble. (If you do it through margin trading, it's still very risky, but not nearly as risky as trying to game the system. In some cases, doing this makes you not only civilly but criminally liable.) The lending bank absolutely can lose if your stocks tank, since then there will be nothing backing up the loan." "I'm going to assume that by ""register the house in my name"" you mean that the house is legally yours. In that case there are a number of implications, tax and otherwise. You should also be very clear with your father about what happens when the house is sold. Do you give him back what he paid for it? Does he get all the value? What happens if the value has gone down? Some of this is down to Indian law, which I know nothing about. However all of these are red flags which you should consider before doing this. This is not legal advice in any jurisdiction."