There are multiple components to bank financing for LOC's.
"Calculated daily" - this means that the bank will take the balance of the credit each day and multiply it by 1/365th of the annual interest rate. e.g. if your balance is $13k, then each day they will calculate the interest owing by multiplying the $13,000 by 3.95%/365 (~$1.4068/day).
"Compounded monthly" - at the end of the month, the bank will add up the calculated daily interest and the total amount will be credited from your LOC. e.g. If you withdrew $13,000 on January 1, on February 1 you would have $43.61 draw down on your LOC. The reason this is called compound interest is because starting on February 1, the daily calculated interest would be $13,043.61 (original Jan. 1 balance plus the interest charged on Feb. 1) multiplied by 3.95%/365 (~$1.4116/day)
For most standard lines of credit, the minimum payment is the interest. This way it is impossible to compound the interest because you would pay the interest using other monies. However, for PSLOC's, banks will normally allow the interest payment to come from within the LOC as many students do not have the ability to make minimum monthly payments while attending school.
Okay... someone tell me I'm wrong 😛