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How is interest calculated yearly? Watch

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    Hi,

    I'm really confused. This morning, my mum paid a cheque into my building society account. I had withdrawn the money a month ago only to pay the same amount back into my building society. I was discussing with my mum and she said "it's a shame you bothered taking the money out because you won't get interest on it now". I said I don't understand, why won't I get interest on it when I repaid it? And she said something about it being a new year now? I'm so confused! How is it a new year?! What does she mean? Does she mean that because I took the money out in the first place the interest I would have got will be taken off my annual rate?
    This isn't important, btw, I just feel like a complete idiot for not having a clue about these things!
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    Usually interest is calculated daily and paid monthly/yearly.

    So it's interest rate/365 * amount in your bank on any given day.

    So say you had a 4% net interest rate, your interest is paid monthly and you had £2,000 in the account for the first 10 days, then paid a further £1k, you could expect interest of roughly £8.77

    £2,000 x (4%/365) = £0.2191780822 a day, x 10 days = £2.19 (rounded)
    plus
    (£2,000 + £1,000) x (4%/365) = £0.3287671233 a day, x 20 days = £6.58 (rounded)

    So you missed out on earning interest on the time between when you took the money out and put it back in. You still earned interest whilst the money was in the account though.
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    Your account may have had special conditions.

    For example, if it was an ISA account, on 6th April, it is a new tax year (so you would have your tax allowance for 2013/2014 and now we're into 2014/2015 tax year.

    Equally some accounts will not give you interest if you take the money out early (typically fixed rate accounts).
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    (Original post by Runninground)
    Usually interest is calculated daily and paid monthly/yearly.

    So it's interest rate/365 * amount in your bank on any given day.

    So say you had a 4% net interest rate, your interest is paid monthly and you had £2,000 in the account for the first 10 days, then paid a further £1k, you could expect interest of roughly £8.77

    £2,000 x (4%/365) = £0.2191780822 a day, x 10 days = £2.19 (rounded)
    plus
    (£2,000 + £1,000) x (4%/365) = £0.3287671233 a day, x 20 days = £6.58 (rounded)

    So you missed out on earning interest on the time between when you took the money out and put it back in. You still earned interest whilst the money was in the account though.
    Ah ok! I get it now! So will the rate go back to what it was before even though I missed out while the money was out?
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    (Original post by flower124)
    Ah ok! I get it now! So will the rate go back to what it was before even though I missed out while the money was out?
    Normally. What kind of account is it?
 
 
 
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