Monthly paid interest Verses Annual Interest.

Penny_Less_3

When you open some accounts you are given the choice of either getting the interest monthly or yearly.

The Interest rates quoted are usually different but both quoted as being the same AER figures, does this mean it makes no difference the interest payment method choice you make ?).

My question is, is it better to go for the monthly or yearly option if you are going to make a fixed term deposit with no withdrawals and no additional deposit during the term? Given the

How can you calculate what would work out the best option when the figures are given as being the same AER, eg if you had £10,000 and Monthly would pay 3.20% and Yearly 3.25% as annual rates but both listed as 3.25% for AER

I’m just a bit confused so would value a simple explanation.

Reaper

If the monthly interest is paid back into the account then you earn interest on the interest. That is why you may have different figures quoted but identical AERs. At the end of the year there will be no difference between the two.

However if you take the monthly income out of the account then it can not earn interest-on-the-interest and you will get less.

Baldur

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

natman

Penny_Less wrote: »

When you open some accounts you are given the choice of either getting the interest monthly or yearly.

The Interest rates quoted are usually different but both quoted as being the same AER figures, does this mean it makes no difference the interest payment method choice you make ?).

My question is, is it better to go for the monthly or yearly option if you are going to make a fixed term deposit with no withdrawals and no additional deposit during the term? Given the

How can you calculate what would work out the best option when the figures are given as being the same AER, eg if you had £10,000 and Monthly would pay 3.20% and Yearly 3.25% as annual rates but both listed as 3.25% for AER

I’m just a bit confused so would value a simple explanation.

Hi, there shouldnt be no difference if both indicate that AER are the same.
Something called compund interest comes into effect.
The monthly rate is lower becasue of this, let me try and show you below.

IF you have say £1000 in an account and you get monthy interest at say 3%, you would get roughly £2.50 interest.
The next month you would have in your account 1002.50 and you would get interest on this amount. not the original £1000 as the interest of £2.50 is taken into account when making the next interest payment calculation.

where annually - you have £1000, you have this in all year and get at the end of the year £30.00.
Many people choose monthy as they may have quite a bit of money and use the interest as a sort of 'salary payment,
For example if you had £50,000 at 3% you would get around £125 a month.
Hope this make a little more sense.
Basically whether annually or monthly interest it should all work out the same, so long as you keep the interest that you have been paid that month in your account.

Stavros_3

I have the B&B (now Spaindander) also on monthly interest which I prefer (1.9% net after tax deducted). The downside is there was an introductory bonus which finishes in March. Where is there equally a good monthly interest account where the interest is paid back into that account. I'm not interested in any banks in India etc, cheers Stav

Baldur

Stavros wrote: »

I have the B&B (now Spaindander) also on monthly interest which I prefer (1.9% net after tax deducted). The downside is there was an introductory bonus which finishes in March. Where is there equally a good monthly interest account where the interest is paid back into that account. I'm not interested in any banks in India etc,

A look through the comparison sites is probably a good starting point, e.g. http://moneyfacts.co.uk/compare/savings/variable-rate/monthly-income/

Stompa

You're actually better off opting for annual interest. With monthly interest, tax is deducted every month, and once deducted that money stops earning interest. With annual interest though, that money remains in the account (earning interest) for the entire year.

The difference between the two is very small though!

Penny_Less_3

Thank you all for the explanations, and link, I actually understand it now.

Stavros_3

I've had a look at the Skipton B/S. Anyone any experience of their online banking, plus how safe are they, never much heard of them, ta Stav

Just_landed

Skipton B/S. Anyone any experience of their online banking, plus how safe are they >>>>>>>

I have, not the online side just telephone side. They took over Scarborough Building Society last year be careful. I have had a number of accounts with them they advertise a certain interest rate but when you get the paper work the rate is less, I even complained to them and was told they would correct their mistake, I believe they call it lip service. They didn’t and the costs to telephone them added to the loss,