Monthly saving interest CONFUSED! help please!

lj777

HI guys, I am looking at this Barclays monthly savings account. Which has 4.25% AER, but if you make a withdraw it drops down to 3.03% that month.
Interest is paid monthly, calculated daily.

So if I put in 250 on 1 Feb, how much interest do I get on 1 Mar?

What if I put in 250 on 1 Feb, then make a withdraw on 3 Feb (so interest drops to 3.03). how much will I get on 1 Mar?

Thanks!

PS , just thought of another question:They say interest drops to 3.03% with withdraw, does that mean once I make a withdraw , the lower interest applies to ALL MONTHS afterwards i.e. drops to 3.03 forever? Or just for that particular month I make the withdraw?

Lokolo

Interest is 4.17%/2.99% gross. So.

First month = 28 days
£250
Interest 80p

'Second' month = 28 days
£250
Interest 58p

lj777

Lokolo wrote: »

Interest is 4.17%/2.99% gross. So.

First month = 28 days
£250
Interest 80p

'Second' month = 28 days
£250
Interest 58p

Hi are you using the calculator on Martin's article? I tried that one it shows the same result as yours. But the problem here is the interest is calculated daily, not monthly? I am not sure whether that calculator does compound or simple interest that's why i am confused. besides, how do you get gross=2.99%??

Baldur

lj777 wrote: »

But the problem here is the interest is calculated daily, not monthly?

Most, if not all, accounts have their interest calculated daily, whether it's paid monthly or annually.

lj777

Baldur wrote: »

Most, if not all, accounts have their interest calculated daily, whether it's paid monthly or annually.

So is it compound or simple interest??

Lokolo

lj777 wrote: »

Hi are you using the calculator on Martin's article? I tried that one it shows the same result as yours. But the problem here is the interest is calculated daily, not monthly? I am not sure whether that calculator does compound or simple interest that's why i am confused. besides, how do you get gross=2.99%??

No. I am just amazing.

The rates you have quoted are AER, not monthly. AER = Annual Equivalent Rate. The monthl rate is lower than this (see my rates I have quoted). If you were to be paid annually you would get the higher rate. You also get the higher rate if you leave monthly interest paid into the account throughout the whole year as the monthly interest then compound throughout the year.

I have used daily interest, daily interest is not compounded.

Month 1 - 28 days - Start with £250
80 interest. Total now in account £250.80

Month 2 - 28 days - Start with £250.80
80 interest. Total now in account £251.60

Month 3 - 28 days - Start with £251.60
80 interest. Total now in account £252.40

Month 4 - 28 days - Start with £252.40
81 interest. Total now in account £253.21

So even though you haven't added more to the account, each month you are getting slightly more interest. With the low amounts I've explained you cannot see it until the 4th month. If I used higher amounts its easier to see.

---

DAILY INTEREST:

[(AMOUNT / 100) * RATE] / 365

Then thats daily interest, times it by the number of days until interest is paid.

lj777

Lokolo wrote: »

No. I am just amazing.

The rates you have quoted are AER, not monthly. AER = Annual Equivalent Rate. The monthl rate is lower than this (see my rates I have quoted). If you were to be paid annually you would get the higher rate. You also get the higher rate if you leave monthly interest paid into the account throughout the whole year as the monthly interest then compound throughout the year.

I have used daily interest, daily interest is not compounded.

Month 1 - 28 days - Start with £250
80 interest. Total now in account £250.80

Month 2 - 28 days - Start with £250.80
80 interest. Total now in account £251.60

Month 3 - 28 days - Start with £251.60
80 interest. Total now in account £252.40

Month 4 - 28 days - Start with £252.40
81 interest. Total now in account £253.21

So even though you haven't added more to the account, each month you are getting slightly more interest. With the low amounts I've explained you cannot see it until the 4th month. If I used higher amounts its easier to see.

---

DAILY INTEREST:

[(AMOUNT / 100) * RATE] / 365

Then thats daily interest, times it by the number of days until interest is paid.

many thanks for this, it's just that the maximum they allow you to put in is 250. Not sure if the accumulating interest could earn more.

Lokolo

lj777 wrote: »

many thanks for this, it's just that the maximum they allow you to put in is 250. Not sure if the accumulating interest could earn more.

Yes it will. Thats why the AER is higher than the gross. It means the interest itself earns interest and over the year you earn 4.2% even though you have been getting 4.17% monthly.

lj777

Lokolo wrote: »

Yes it will. Thats why the AER is higher than the gross. It means the interest itself earns interest and over the year you earn 4.2% even though you have been getting 4.17% monthly.

Hi, i just wanna ask another thing since you are an expert! about ISAs, the max is 3600 for a tax year.. what is a tax year? it's Feb now, does that mean the current tax year will end in April 2010?

The thing is i am kind of short of cash and I haven't use up the 3600 allowance yet, and i never will use them all before april this year. Should I withdraw money from my ISA ccount, or regular savings account?

Lokolo

lj777 wrote: »

Hi, i just wanna ask another thing since you are an expert! about ISAs, the max is 3600 for a tax year.. what is a tax year? it's Feb now, does that mean the current tax year will end in April 2010?

The thing is i am kind of short of cash and I haven't use up the 3600 allowance yet, and i never will use them all before april this year. Should I withdraw money from my ISA ccount, or regular savings account?

Tax year is April 6th to April 5th.

What rate are you getting on your ISA?

lj777

Lokolo wrote: »

Tax year is April 6th to April 5th.

What rate are you getting on your ISA?

its barclays golden ISA, 2.58% AER / 2.55% tax free P.A. - variable and paid monthly, currently has 1100 pounds in it - unlikely to go up until April this year.