Calculating Interest

elwoodsusanm

I have to admit I get confused about this subject:o Which is better - daily/monthly interest or annual? Or does it add up to more or less the same amount?

exel1966

It all depends on the AER figures. You need to look at those.

Most accounts calculate interest daily and will then pay monthly or annually. If the AER figures are the same there is minimal difference providing any interest paid monthly is kept in the same account for the year.

Take a look HERE

isofa

All interest is technically calcuated daily, but then either paid at a lower rate monthly, to be compounded month on month over a year, or paid once at the full yearly rate.

As long as the monthly rate lists an AER (annual equivalent rate) matching the annual rate, then you'll be getting the same interest, whichever one you choose.

Stavros_3

Monthly v annual. Obviously you get a higher amount if its left in for a year but its not that much. I now tend to go for monthly accounts that pay the interest back into the account the money is in, but some monthly accounts only pay the interest into your linked nominated account. I have 2 at the moment, one with the B & B paying 6.51% or 5.21% net after tax, my other is with the Northern Rock e-saver at 6%. Its a personal choice of course

elwoodsusanm

So if I wanted to draw money out as well as put money several times during a 12 month period I would be better off with monthly paid interest?:undecided

isofa

elwoodsusanm wrote: »

So if I wanted to draw money out as well as put money several times during a 12 month period I would be better off with monthly paid interest?:undecided

It would make no difference, as interest is always calculated daily - providing the monthly rate AER = the annual rate.

With monthly you'll see your balance increasing per month, that's all.

exel1966

elwoodsusanm wrote: »

So if I wanted to draw money out as well as put money several times during a 12 month period I would be better off with monthly paid interest?:undecided

Makes no difference. You only get paid interest on what's in the account at the end of each day.

elwoodsusanm

OK. Thank you everyone