A sneaky way to get more interest?

Reaper

I don't know whether this works, so if anybody knows please tell.

Interest on savings is usually paid either monthly or yearly, sometimes you can even choose which. If interest is paid monthly the rate is lower because you will benefit from compounding, resulting in the same % AER over the year.

Now if you close an account you are paid all the interest you are due up to that point, since they calculate it on a daily basis.

Now my thought is... if you go for an account that pays annually but you close and switch/re-open it every, say 6 months, would you be better off? You would get an interest payment early which can then be compounded.

Probably only worth it for large sums. You might lose a few days interest while the money is being transfered (unless there is a way to avoid it?).

So would it work or do the building societies reduce the payment to reflect the early payment?

deemy2004

Hmm interesting, IF no days were lost then you would be better off by about 0.08% So not much, still on a large amount it would be significant

Unfortunately if you did lose 4 days between transfers then the saving would be lost. Infact it could be more than 4days.

Reaper

I guess it would work if you opened e.g. multiple Egg Savings accounts. People tend to this anyway since Egg keep offering short term promotional rates. You could ask them to close the old account and move the money to the new one. Presumably this happens instantly. The same goes for any savings company that lets you have multiple accounts.

If your 0.08% figure is correct then even a top end stoozer with £50,000 of stoozed money will only make £40 profit from doing this. Still, that's a night or two down the pub for not much effort.

steady__eddie

I currently use this tactic for my "rainy day money" in case the roof blows off & I need some cash a.s.p. I use Lloyds & Nationwide net a/cs respectively for 6 months each every year. It's easy to get cash from Lloyds but Nationwide require a couple of days notice before you can have cash. Then it's just a case of a cash withdrawl, a walk round the corner followed by a speedy deposit. I don't think I would use this system for the bulk of my cash readies though due to relatively poor interest rates paid on these a/cs.

Milarky

I guess it would work if you opened e.g. multiple Egg Savings accounts. People tend to this anyway since Egg keep offering short term promotional rates. You could ask them to close the old account and move the money to the new one. Presumably this happens instantly. The same goes for any savings company that lets you have multiple accounts.

If your 0.08% figure is correct then even a top end stoozer with £50,000 of stoozed money will only make £40 profit from doing this. Still, that's a night or two down the pub for not much effort.

Egg calculates interest on a daily compound basis anyway - so you cannot use this trick to take advantage in their case.