*Help with an interest rate query for nationwide account*

Lansdowne

The key thing to remember about interest rates, for anyone who's not used to them, is that any rate is quoted 'per annum', meaning this is what you will get on an amount which is in the account for a year.
So suppose an account says "1.45% interest" and "paid monthly". Then for every £100 you get £1.45 a year, but paid monthly it is £0.12 a month into the account.
If it says "1.45% interest" and "paid yearly on 31st March", you still get £1.45 a year, but all in one go on that date. If you started the account on 14th November, then on 31st March you would get a fraction of the £1.45, namely 4½-twelfths because the money was there for 4½months not a year.

They look like tiny amounts because £100 is quite a small sum, but most people would put £100 away hoping to put more away whenever they can and allow the money to build up.

Might help someone.

bristolleedsfan

isayhello wrote: »

(If anyone has any personal recommendations for another instant access account for a balance of 20k that would be great).

.

http://www.abbey-products.com/product/IAS/

isayhello

Thanks xlr8 and everyone else.

Interest rates can seem a bit confusing if you've never really had to deal with them before. I notice that the annual interest rate is usually a bit higher than the monthly rate...does this actually make no difference in the end because of compound interest? or would you actually get more if you went with the annual rate?

I do have a full ISA already but its getting a poor rate at barclays so im going to change that too but first i want to get my savings rate sorted. I'm tempted by YBS but not sure if they take ages to open the account or not. I'm now thinking of going for the nationwide fixed ebond at 3.25%.

Then i'll focus on the ISA...this is a full time job sorting this out

martinman3

isayhello wrote: »

I'm tempted by YBS but not sure if they take ages to open the account or not. I'm now thinking of going for the nationwide fixed ebond at 3.25%.

According to this thread
http://forums.moneysavingexpert.com/showthread.html?t=1434927
the YBS Internet Saver can be up and running in 10mins, if you are on the Electoral Roll.

Exceller8

rb10 wrote: »

I'm afraid it's not as good as that: 20% of the £2 interest that would be paid is actually 40p, not 10p, so you actually only get £1.60 added to your account. (If you are a higher rate taxpayer, you'll have to pay yet more later).

Thanks rb10
I obviously only had a fraction of my head working last night:rotfl:

So to work out the right amount of tax, it's 20p for every £1 of interest you earn if you are a standard rate tax payer.XLR8:hello:

Exceller8

isayhello wrote: »

Thanks xlr8 and everyone else.

Interest rates can seem a bit confusing if you've never really had to deal with them before. I notice that the annual interest rate is usually a bit higher than the monthly rate...does this actually make no difference in the end because of compound interest? or would you actually get more if you went with the annual rate?

Lets try and explain this for you all banks/building societys have to advertise interest rates at AER = annual equivilent rate Eg: 3.25% AER to make it easier to compare products for the customer. Some offer interest Eg : 3.21% per month @ a slightly lower rate because you are earning interest on the interest as it goes into your account every month (this is compound interest) but works out the same as the annual interest paid or it will have its own AER to tell you what you get over the year if no withdrawls are made. This is my understanding of how interest rates work.XLR8 :hello: Im not an expert and im stiil learning new things myself on MSE site.

Does this mean that in the end, that 12 monthly interest payments or 1 annual interest payment on an account would amount to the same, if no money was taken out?

Read the next post for answer to this question (thanks rb10)

rb10

isayhello wrote: »

I notice that the annual interest rate is usually a bit higher than the monthly rate...does this actually make no difference in the end because of compound interest? or would you actually get more if you went with the annual rate?

If you use the AER, then this will take into account the effect of compounding for accounts that pay monthly interest.

You will usually be slightly better off by taking the annual interest option, as the AER for annual interest is generally a little higher than the AER for monthly interest.