Aer - Apr ??

tonkasdog

Hi guys, sorry if this is a very basic question but what should I be looking out for when searching interest rates? What is the differance between APR & AER? What do they stand for? Do all savings accounts pay interest monthly? I had cash in KE & now it is with ING but to be honest I'd feel safer moving it to a UK bank so just searching for the best rates.
Thanks

Baldur

See http://www.moneysavingexpert.com/banking/interest-rates#AER and http://www.moneysavingexpert.com/banking/interest-rates#APR

Lokolo

AER

Annual Equivalent Rate.

The is the interest rate you get if you leave your account for a year. i.e. any interest paid monthly is left in the account.

No not all savings pay monthly, most annually.

Aegis

APR = Annual Percentage Rate. Usually used for loans, this shows the level of interest you will pay expressed as an annual figure.

AER = Annual Equivalent Rate. Used for interest rates where the interest is treated as being paid in one lump sum at the end of a 1-year term.

tonkasdog

Thanks for your quick answers guys, I'm sure I was getting around £28 per month from KE on £6K? This seems like a lot and the AER must have been great? If I had £6K in a bank that paid interest annualy then I take it I would get any interest on a set date each year, even if the savings where only in there for 3mths, I would get the interest this had accrued later on?

Lokolo

Eh?

Interest is calculated daily. So if you put money in for 3 months, you get 3 months interest etc.

tonkasdog

Sorry Lokolo I might be confusing you here, you said some savings accounts pay interest annually so if I put £6K in one of these accounts I would not get the interest on a monthly basis like I did at KE right? If so, would the interest be paid at the end of a 12mth period? Just say I had the £6K in it for 3mths then withdraw it all, would I have to wait 9mths to get any interest?

Alfie_E

tonkasdog wrote: »

Just say I had the £6K in it for 3mths then withdraw it all, would I have to wait 9mths to get any interest?

Yes. However, if you close the account, any interest that has accrued is immediately credited to the account and that total balance, including the interest, paid to you.

Edit: If you don’t close the account, you’ll receive the interest on the fixed day of the year for that type of account. You could have to wait up to nine months. But, equally, you might have to wait only one day. For example, if you take your money out on 31 December and interest is always paid on 1 January of each year, that would be a one-day wait.

tonkasdog

Thanks Alfie, I'm just trying to educate myself & this is all new to me. I was getting £30 per month from KE on a £6000 balance so if the AER was 6% that works out at 0.5% per month which would be £30, vey simple when you understand it! Do you know of any UK savings account that pay a similar rate of interest monthly?

Lokolo

For monthly paying accounts:

Gross is the monthly rate you will get.
AER, if you leave the interest in that is the rate you will get.

i.e. 6.08% gross, 6.25% AER

So each month you get 1/12th (blame the old guy below) 6.08%. If you take the interest out and spend it, at the end of the year the rate you would h ave got is 6.08%.
However, if you leave the interest in the account to compound, you will end up with a 6.25% interest in total figure.

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For best rates go to moneysupermarket, then go into Savings, then put in search stuff and walla!

Alfie_E

The accounts from West Bromwich Building Society and Yorkshire Building Society currently on Martin’s Savings Accounts page both have the option of having interest paid monthly. For the AA account, interest is also paid monthly – there is no option of having it paid annually.