You could not make it up.

rb10

Yes, this example is often quoted ... that doesn't mean that it's a good example though.

Many people use the Liquid Gold account as a passbook-based alternative to a current account. Many people, particularly the elderly, do not want cheque books and debit cards - cash is the way forward, in their opinions. And this account provides what they want.

Ok, it may not be particularly money-saving, but then a very similar analogy is that HSBC/Barclays/Natwest all promote their current accounts, but as they pay 0%/0.1% interest, having accounts with them is not particularly money-saving either.

Unfortunately, all these banks have accounts that pay poor rates of interest. Yes, I agree that people would be mad to have a Liquid Gold, but only in exactly the same way as people would be mad to have a current account at Natwest.

nzseries1

DrScotsman wrote: »

But no! Due to rounding you will never actually get any compound interest on £100 for 100 years, so it's a measly £5 :rotfl:

Before TAX!!!

Consumerist

DrScotsman wrote: »

But no! Due to rounding you will never actually get any compound interest on £100 for 100 years, so it's a measly £5 :rotfl:

But, wait a minute, wouldn't the total interest after 40 years be £2.00 and wouldn't that £2.00 earn 1p of compound interest ? :rotfl:
.

vaporate

Such 'interest' rates are laughable. In fact they are so bad it should be made illegal lol

2% is low enough. Tax free that is.

In fact, current interest rates aside, how much interest SHOULD banks pay in a ideal world? (Any balance)

Joe_Bloggs

Clearly 0.00% is as low as you can get. Are there any accounts that offer more than zero but less than 0.05% per annum gross (HSBC Flexible saver Rate £50000 + ) ?
J_B.

jimbow25

rb10 wrote: »

Yes, this example is often quoted ... that doesn't mean that it's a good example though.

Many people use the Liquid Gold account as a passbook-based alternative to a current account. Many people, particularly the elderly, do not want cheque books and debit cards - cash is the way forward, in their opinions. And this account provides what they want.

Ok, it may not be particularly money-saving, but then a very similar analogy is that HSBC/Barclays/Natwest all promote their current accounts, but as they pay 0%/0.1% interest, having accounts with them is not particularly money-saving either.

Unfortunately, all these banks have accounts that pay poor rates of interest. Yes, I agree that people would be mad to have a Liquid Gold, but only in exactly the same way as people would be mad to have a current account at Natwest.

true, but halifax do file it under 'savings' on their website and I believe this is how it was originally marketed, by comparison I don't think anyone has claimed the standard current accounts you mention were worth using for saving.

DrScotsman

Consumerist wrote: »

But, wait a minute, wouldn't the total interest after 40 years be £2.00 and wouldn't that £2.00 earn 1p of compound interest ? :rotfl:
.

Um, no.

£2 * 0.05% = 200p * 0.0005 = 0.1p

1p is 0.5% of £2.

john_s_2

DrScotsman wrote: »

Um, no.

£2 * 0.05% = 200p * 0.0005 = 0.1p

1p is 0.5% of £2.

I couldn't resist looking at this. Once the £100 has grown to £110.00, the extra £10 will attract £0.005 - which will round up to £0.01. So the customer can then start enjoying the benefits of compounding.

It would take 200 years to get to £110 however.

DrScotsman

john_s wrote: »

I couldn't resist looking at this. Once the £100 has grown to £110.00, the extra £10 will attract £0.005 - which will round up to £0.01. So the customer can then start enjoying the benefits of compounding.

Not necessarily, you're making an assumption on the method of rounding used.

http://en.wikipedia.org/wiki/Rounding

Wikipedia wrote:

Round half to even

A tie-breaking rule that is even less biased is round half to even, namely

* If the fraction of y is 0.5, then q is the even integer nearest to y.

Thus, for example, +23.5 becomes +24, +22.5 becomes +22, -22.5 becomes -22, and -23.5 becomes -24. This variant of the round-to-nearest method is also called unbiased rounding, ... , or bankers' rounding. ... This is widely used in bookkeeping.

This method would round 0.5p to 0p. EDIT: Ah, but in this case it'll be rounding 5.5p to 6p, so you're right.

Didn't get much else by Googling, but given the name and the fact it's used in bookkeeping I assume that most financial institutions employ this method, although anyone feel free to prove me wrong.

john_s_2

DrScotsman wrote: »

Not necessarily, you're making an assumption on the method of rounding used.

http://en.wikipedia.org/wiki/Rounding



This method would round 0.5p to 0p. EDIT: Ah, but in this case it'll be rounding 5.5p to 6p, so you're right.

Didn't get much else by Googling, but given the name and the fact it's used in bookkeeping I assume that most financial institutions employ this method, although anyone feel free to prove me wrong.

Ah yes, good old bookkeeper's rounding. There are other methods as well to deal with 0.5 (which doubtless you read on that page). It came as a bit of a shock to me when I learnt that rounding 0.5 to 1 is merely a convention. It's one of those things you're taught as a kid and you never question it.

But £110.10 would DEFINITELY start compounding as that returns 110.1551, which round to £110.16