Interest Calculations on savings accounts

adamdynamic

Afternoon all,

Does anyone know how different banks calculate the interest on savings accounts? i.e. do they do it daily? By the amount on a specific day of the month? Is it always the same day?

A friend of mine has a Halifax 'high-earners' account (I forget what it's called), when he took it out he openned a 'Web Saver' account with them which apparently chases the best interest rates on the market. The person who advised him also suggested that he move money in and out of his different accounts on different days so that he is effectively getting interest paid on the same sum of money two or three times each month.

Has anyone else come across or done anything like this? Is my friend confused and he's misunderstood what the bank has told him?

Any thoughts on the matter are most welcome!

Many thanks,

Adam.

Calchas

Not being a high earner, kissack101, I couldn't say for certain, but if I had to hazard a guess I would say that the fundamentals of your post are perfectly plausible.

Given that 90% of the wealth of our country is owned by 10% of our population then yes, why not let them have three time more opportunity of earning interest than the rest of us!

And why shouldn't the banks chase the best rates for the fat cats whilst simultaneously covertly reducing rates for the hoi polloi!

Jonbvn

AFAIK, banks calculate the interest on each savings account on a daily basis. However, I have heard of mortgage lenders both charging interest on the day a mortgage is transferred from one to the other when remortgaging.

adamdynamic

How do you think you would find out how the interest was charged? If you phoned the bank are they likely to tell you or just think that you were trying to run a scam and tell you to beat it?

If it were possible then you could set up a carosel of standing orders between multiple accounts and maximise the interest earned?

LittleVoice

kissack101 wrote: »

Is my friend confused and he's misunderstood what the bank has told him?

The simple answer is that yes, your friend is confused and has misunderstood whatever he was told.

LittleVoice

Actually, interest is paid on money when it is in the account. So if you take it out and put it back in again, you only get interest for the time it is sitting in the account.

In fact, as interest is generally not paid on the day it is withdrawn and may not have interest paid on it until the day after deposit (assuming it is cash and not a cheque), continually paying in and taking out the same amount of money would mean you would have less interest than if you left it alone.

PBA

Interest is calculated on the lowest daily balance, many people seem to think it's worth moving money to accounts just before the annual interest payment date but the banks aren't that foolish!

opinions4u

You could have money in an interest paying current account, pay a cheque in to a high interest savings account (which usually earns interest on the 2nd working day) and potentially earn interest on both until the cheque goes through the current account.

Usually you'd only get an extra day's interest on the current account.

And the current account would usually (there are exceptions) pay a lower rate of interest.

Potential to make gains, but can you be bothered to queue in a branch to deposit the cheque for a relatively modest 1 day return?