Interest Rates Watch

Will.Storm
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#1
Report Thread starter 10 years ago
#1
Hello all, I have been trying to find out about this for some time now, and even the advisor on the Natwest helpline wasn't able to clear things up for me, but surely it is quite simple.

Right I am about to open several accounts: student account (likely to be Natwest), monthly saver (likely to be Halifax's regular saver). Now the issue is, that different accounts offer interest to be paid at different intervals. The AER is fairly obvious for now: the growth percentage added on at the end of the year to your balance (correct me if I am wrong please). These I have seen to be around 3-5%. For the monthy interest, some are also hitting the 5% figure which sounds ridulous as surely that is over 12 times more interest paid at the end of the year if they keep adding 5% every month. (Does it mean it will be the equilivent of 5% AER but split into small amounts every month and is this more benificial?)

Any other advice on savers accounts? I am totally happy to pay into it every month and not withdraw. Thanks in advance!
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gyrase
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Report 10 years ago
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They work out 5% of your balance, divide it by 12 and credit your account monthly if you opt for monthly interest.
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snu
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(Original post by gyrase)
They work out 5% of your balance, divide it by 12 and credit your account monthly if you opt for monthly interest.
Not exactly true, because AER includes compound interest. See here.
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Orthala
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AER for monthly and year is likely to be the same.

Monthly usually has a lower rate, for instance, 6.08% and the Yearly 6.25%.

The monthly may have a lower rate of 6.08% but has the benefit of compound interest, thus making a yearly rate of 6.25% if you leave the interest in the account. Therefore making no difference between being paid monthly and yearly (it does go into more detail when tax is included but we'll leave that for another day).

If the monthly rate is 6.08%, you can work out the interest by doing this:

(Amount / 100 * 6.08) / 12 = interest each month

but the Amount has to stay the same for the whole month for this to work.

And if you are looking at interest rates between 3-5% you should look more, there are offers of 6/7% out there. Every little counts.
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gyrase
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(Original post by snu)
Not exactly true, because AER includes compound interest. See here.
yes and that. But banks offering 3-6% interest ... this would make very little difference to the final balance.
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Will.Storm
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Report Thread starter 10 years ago
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Ahh, that makes lots of sense thank you all very much! I heard that the Halifax regular saver is at 12% AER if u start of with 5k and add a minimum of £25 a month. I shall go find out in branch today
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