11/16   Maybe this is a silly question, but can anyone tell me why banks
        do anything besides annual compounding? It seems to me that annual
        compounding means they pay the least interest to you. At first, I
        thought it was because the balance in your account changes, but I
        think this is already taken into account because they say they
        compound based on the average balance of your account in a given
        time period. Thanks.
        \_ It might be marketing... sure, we only give you 1% APR, but we
           COMPOUND DAILY!  That's the equivalent of a MUCH higher APR!
        \_ Your first inclination is likely correct. Many people need
           their interest more often than that in order to pay expenses.
           Why compound any other way ever if annual works?
        \_ Regular interest means less variation. Rates change constantly. If
           rates drop, the bank isn't stuck paying the high rate. If rates
           climb, they don't want to lose your account by paying below market.
           Some people rely on interest as income, so regular payments are
           necessary. Annual payments means less flexiblity for customers,
           making them less likely to stick around. Finally, it helps keep
           investors on a psychological level to see interest added every so
           often. If you want annual payments, get a CD.