"Bonus" interest rate - how does it work?

MustangSally

I'm looking at opening a new savings account to dump the proceeds of my house sale for 6-8 weeks (when I'll have to pay out the deposit on new house purchase).

The current top rated easy access savings account on the main site is with Citibank: 3.3% AER inc 2.25% bonus

I don't quite understand how the bonus works. Am I effectively earning 5.55% for the duration that I have the funds with them or do you have to keep the funds in for the introductory period (12 months) in order to get the bonus rate?

It's probably an obvious question but I've not managed to find the answer in any small print yet!

Thanks in advance.

Lokolo

You are getting 2.25% bonus + 1.05% normal rate, which then is 3.3%

If you had the account before bonus you would be getting a 1.05%. If you got in with the bonus you get 3.3%.

As soon as the bonus is gone it goes down to 1.05%.

However, sometimes the bonus is fixed, but the other part is variable. This means the 2.25% will always be there, but the 1.05% could go down to 0%, giving you an overall rate of 2.25%.

YorkshireBoy

MustangSally wrote: »

3.3% AER inc 2.25% bonus

Am I effectively earning 5.55%

Be nice wouldn't it! (the "inc" stands for including. )

Interest is paid monthly at the rate of 3.25% gross p.a. (made up of 1% underlying and 2.25% bonus) so if you've £10,000 in there for a 31 day month you'll receive...

£10,000 x 3.25% / 365 x 31 = £27.60 gross

YorkshireBoy

Lokolo wrote: »

1.05% normal rate

Even though we've put the clocks back and given you another hour in bed it's still too early for you (ex?) students isn't it.

Lokolo

YorkshireBoy wrote: »

Even though we've put the clocks back and given you another hour in bed it's still too early for you (ex?) students isn't it.

Yes haha.

MustangSally

YorkshireBoy wrote: »

Be nice wouldn't it! (the "inc" stands for including. )

Oooops!! That's me wanting to get the money out of the non-interest earning current account as quickly as possible and not reading properly!

MustangSally

Thanks all. Makes sense now. And yes, it was obvious, eh!