ISA,Current Account,Saving Accounts

Ladywriter1968

Apparently ISA is suppose to be the best, but it seems that all the interests paid on any account from any bank is quite low compared to what interest they want back when you borrow from them. I think its about 29% apr or something and they only give you like less then 5% and that's even taxed on your savings. Anyone know much about this area, do tell? PS, I take is the APR stands for abbreviation for interest or something. I guess the obvious would be April for new tax year, but never really been sure what APR meant?

withnell

Your quote of 29% is a credit card rate offered to people with less than perfect credit history, who are a risk to the lender. Many people are using loopholes to have to not pay back their debt, and the money has to come from somewhere --> higher credit card rates.

A more comparable average loan rate is 10% if talking about unsecured (riskier) loans, and many people pay under 5% for their mortgage borrowings. The bank has to make its profit somewhere, and running a large branch network, internet banking platforms and call centres is not cheap.

When you lend to the bank, you lend pretty much risk free, and the returns are in line with this. Compare the rates for the lowest risk savings available, NS&I, who are an agency of HM Treasury.

The banks don't have any control about you getting taxed on savings, so you need to write a letter to your MP about that one.

APR = annual percentage rate

G_M

Apparently ISA is suppose to be the best

Says who? What do you mean by 'best'? ISA's a just a benefit the government gives us - ie an amount we can save without having to pay tax. As with all account types, you need to shop around (just as you would to find the cheapest place to buy a camera/mobile phone/whatever).

interest they want back when you borrow from them. I think its about 29% apr or something

I pay 3.5% on a huge amount of borrowing - that's the rate the bank charges me for my mortgage. The rate banks charged depends on the risk they take by lending to you. If you are a good credit risk and/or the loan is guaranteed by a security (like property), the rate is much lower.

The 'Annual Percentage Rate' is a standard way of comparing different types of borrowing over a full year. It takes account of compounding (ie earning interest monthly, thus increasing you capital and earning interest on the interest) and short term bonuses (ie when a bank offers extra interest for the 1st 6 months - thus the next 6 months are at a lower rate) etc.