interest - monthly or annual?

pavlovs_dog · 6 February 2005 at 9:25AM

hey guys

was just wondering whetehr someone cold advise me whether there is any difference between having the interest on your ISA paid monthly or annually...

does one work out more lucrative than the other, or do you get the same amount of interest overall no matter which one you use?

cheers

p_d

blinko · 6 February 2005 at 11:48AM

monthly works out better as it gets compounded, but you dont get the same rates and it usually pays better to get annual interest.

Walletwatch · 8 February 2005 at 8:50PM

Should not make a difference technically, as the rates that are offered annually should have the same effect as the rate offered monthly plus the effect of compounding.

Don't see how the above cannot stand, especially for an ISA. Otherwise one would always go for the option that gave you the higher effective interest rate.

pavlovs_dog · 10 February 2005 at 12:05PM

i figured that woould be the case ^, otherwise everyone would opt for one type of interest rather than the other. i just wanted to make sure...im still new to all this

i think monthly is best for me...seeing it build up each month seems to deter me from taking the money out, which is good

lipidicman · 10 February 2005 at 3:20PM

They are usually both calculated daily but sometimes the yearly option is slightly better - just look at the AER rather than the gross rates to determine this (ie the gross rate is dependant on the period of payment) the AER gives you the yearly equivalent

ie C&G bonus tracker

annual interest without bonus
£50,000+ Gross 4.45 AER 4.45

monthly interest without bonus
£50,000+ Gross 4.36 AER 4.45

note that the gross rates are different, but the AER is the same. My point above is that sometimes you get a higher AER if you opt for yearly (e.g. lloyds online saver) as paying you once is cheaper!

interest - monthly or annual?

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