What is Bank Interest and What is Bank Interest in 2022?

As a bank customer, you may be familiar with the term bank interest. With bank interest, your balance stored in the bank will also increase or profit.

It turns out that bank interest also has various types and factors that affect the amount of bank interest.

What are the types of bank interest that you must know and the factors that affect loan bank interest rates?

Here's a summary of bank interest!

What is Bank Interest?

Quoted from the page Financial Services Authority (OJK)Bank interest is remuneration provided by banks to customers who buy or sell their products. 

In general, interest on deposits is the price that must be paid to customers (who have deposits). While loan interest is the price that must be paid by the customer to the bank (if the customer gets the loan). 

Interest rates are also usually calculated in percent, the amount of interest that must be paid by the customer or bank is adjusted to the bank's rules and economic conditions at that time.

Types of Bank Interest

Different types of bank interest based on their natureHere are the types of bank interest that you must know!

Types of Credit Bank Interest Rates by Nature

1. Fixed Interest Rate 

Fixed interest rate (fixed) is the most common type of interest rate which has a fixed fee and will not change until maturity. An example is taking a loan with an interest rate of 7 percent, then the interest rate will remain and continue to be paid until the last installment.

2. Floating Interest Rate 

floating interest rate (floating) is the opposite of a fixed interest rate, this rate will follow the price of interest rates on the market. So that the amount of interest rates are not based on the agreement at the beginning of the credit. If interest rates in the market rise, the interest rates you will receive will also increase.

An example of its application is in mortgage interest rates that have a certain period of time, generally in the first year the debtor will use fixed interest, then in the following year it will use interest. floating.

Types of Bank Loan Interest Rates Based on Calculation

1. Flat Interest Rate

The flat interest rate is a type of interest rate that has a calculation of the total initial loan principal and is divided proportionally based on the credit period. Generally, this interest rate is used for short-term loans such as: smartphone, motorbike, or Unsecured Loans (KTA)

Flat Interest Rate Formula = (P xtxi) : jb

Note:

P = original loan principal

I = interest rate per year

T = credit term by year

Jb = credit term by month.

2. Effective Interest Rate

This type of interest rate is using the calculation of the remaining principal amount of the loan. So that the amount of interest that must be paid will decrease as the installment period goes on. So, the less principal the loan, the smaller the interest that needs to be paid.

Effective Interest Rate Formula = SP x 1 x (30/360)

Note:

SP = monthly loan principal balance

i = interest rate per year

30 = number of days in 1 month

360 = number of days in 1 year

3. Annuity Interest Rate

The last type of interest rate based on the calculation is the annuity interest rate which is a combination of the effective interest rate and the flat interest rate. So the interest is calculated from the remaining principal of the loan and then divided evenly based on the repayment period.

Annuity Interest Rate Formula 

= Principal Installment + Effective Interest Installment

= PP xi : (1-1 : (1+i) xn)

Note:

PP = loan principal

n = number of installments

i = interest rate per year.

Types of Interest Rates for Deposit Products

1. Savings Deposit Interest Rate

As the name implies, this type of interest rate is the amount of interest given by the bank to customers who have savings or deposits in the bank. The interest rate is determined based on the nominal savings and different bank provisions. Sometimes it is also adjusted to the bank's interest rate per year.

2. Interest Rates for Deposits

Deposit interest rates will usually be given by banks to customers who will open a deposit savings account. The amount of deposit interest will also remain the same within a certain period, because time deposit savings will not change until maturity.

Factors Affecting Bank Interest Rates

There are several factors that make banks have to raise or lower interest rates, the following factors affect bank interest rates.

Government policy

Government policy is one of the factors in determining the amount of interest on bank loans, generally this policy is only limited to determining the minimum and maximum limits of interest.

Fund Stock

Bank interest provisions are also adjusted to the available stock of funds from the number of borrowers and savers. If the stock of funds in the bank is small but the number of borrowers increases, the bank will also increase the deposit interest rate to attract people's attention to save in the bank.

Competition

Banking is also included in the business, so it is not surprising that many banks are competing to offer lower loan interest rates, because they do not want to lose to competitors.

Borrowing Time Duration

The next factor that affects bank interest rates is the duration of the loan period, the longer the duration of a loan, the higher the interest rate.

Customer Loyalty

Generally, customers who are loyal to a bank will be given low loan interest rates, and usually banks have classified customer types based on customer loyalty and activity in the bank.

Bank Interest Rate 2022

Quoted from the mediaCash, The following is a list of current deposit rates in mid-2022:

BCA Bank Interest 

1 month tenor = 1,90%

3 month tenor = 1,90%

6 month tenor = 1,90%

12 month tenor = 1,90%

Bank Mandiri Interest

1 month tenor = 1,38%

3 month tenor = 2,25%

6 month tenor = 2,63%

12 month tenor = 2,50%

BRI Bank Interest

1 month tenor = 2,00%

3 month tenor = 2,30%

6 month tenor = 2,50%

12 month tenor = 2,75%

In accordance with the explanation above, the amount of bank interest will vary according to bank regulations and also the period of making deposits or borrowing money.