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# Monthly saving interest help please! watch

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1. HI guys, I am looking at this Barclays monthly savings account. Which has 4.25% AER, but if you make a withdraw it drops down to 3.03% that month.
Interest is paid monthly, calculated daily.

So if I put in 250 on 1 Feb, how much interest do I get on 1 Mar?

What if I put in 250 on 1 Feb, then make a withdraw on 3 Feb (so interest drops to 3.03). how much will I get on 1 Mar?

Thanks!
2. About £0.90 (gross) in the first case, since you will receive (roughly) one twelfth of the interest rate for the whole year. In the second case, it will be around £0.62 (gross).
3. (Original post by lj789)
HI guys, I am looking at this Barclays monthly savings account. Which has 4.25% AER, but if you make a withdraw it drops down to 3.03% that month.
Interest is paid monthly, calculated daily.

So if I put in 250 on 1 Feb, how much interest do I get on 1 Mar?

What if I put in 250 on 1 Feb, then make a withdraw on 3 Feb (so interest drops to 3.03). how much will I get on 1 Mar?

Thanks!
I put in £250 for the first month and got 35p the first month then 90p the second. I didn't understand how interest worked so was slightly disappointed but I get it now!
4. (Original post by idesofmarch)
I put in £250 for the first month and got 35p the first month then 90p the second. I didn't understand how interest worked so was slightly disappointed but I get it now!
Presumably in the first month the £250 wasn't in the account for a whole month.
About £0.90 (gross) in the first case, since you will receive (roughly) one twelfth of the interest rate for the whole year. In the second case, it will be around £0.62 (gross).
If I make a withdraw in the first month, will that have significant effect on interests i receive in the other 11 months?(the account has a 12 month fix term contract - will drop to low rate after 12 months)
I was told bya friend that, if I withdraw money on the 11th month, the interest will dramatically reduce but if I withdraw on the first month the difference is only about 30p, not sure if it's true?
Presumably in the first month the £250 wasn't in the account for a whole month.
Yep that's right, my standing order is set up for the 21st of each month.
7. (Original post by lj789)
If I make a withdraw in the first month, will that have significant effect on interests i receive in the other 11 months?(the account has a 12 month fix term contract - will drop to low rate after 12 months)
I was told bya friend that, if I withdraw money on the 11th month, the interest will dramatically reduce but if I withdraw on the first month the difference is only about 30p, not sure if it's true?
On your first point, my understanding from the terms is that the lower rate only applies in months where a withdrawal is made so making a withdrawal in the first month won't impact on later months.

Your friend is right in so much as withdrawing money in later months is going to have a bigger impact than earlier months. Assuming you pay in the same amount each month, if you make a withdrawal in the last months then the interest for that month will be at a lower rate and that will have a bigger impact because the account balance will be higher.

For example, if you pay in £250 per month, and withdrawal say £50 in the first month the lower rate will apply so you'll about 50p interest get rather than about 70p.

If you also pay in £250 per month but instead make a withdrawal after 10 months for example, you're account balance will be (ignoring interest) £250 x 10 = £2500 minus the £50 = £2450 and you'd get £6 interest rather than £8.50.

So the point is that whilst the difference between the higher and lower rates would be the same, the cost of a withdrawal would be higher in later months.
On your first point, my understanding from the terms is that the lower rate only applies in months where a withdrawal is made so making a withdrawal in the first month won't impact on later months.

Your friend is right in so much as withdrawing money in later months is going to have a bigger impact than earlier months. Assuming you pay in the same amount each month, if you make a withdrawal in the last months then the interest for that month will be at a lower rate and that will have a bigger impact because the account balance will be higher.

For example, if you pay in £250 per month, and withdrawal say £50 in the first month the lower rate will apply so you'll about 50p interest get rather than about 70p.

If you also pay in £250 per month but instead make a withdrawal after 10 months for example, you're account balance will be (ignoring interest) £250 x 10 = £2500 minus the £50 = £2450 and you'd get £6 interest rather than £8.50.

So the point is that whilst the difference between the higher and lower rates would be the same, the cost of a withdrawal would be higher in later months.
Excellent explanation! Thanks a lot!

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Updated: February 6, 2010
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