NS&I Direct ISA

Turtle

yes its still calculated daily, but you'd earn less interest than you would with a monthly paying account with the same rate

regularsaver1

am i thick - how so?

Turtle

if you pay in £3k on 6th april, at 5% you'd earn 12.73 (on a 31 day month)which would be credited to the account making the balance 3012.73. next month you'd earn 12.79 as you're earning interest on the interest.

If its only added on once a year the balance of the a/c is always £3k in the a/c, total £150 interst over the year. if you bear with me I'll work out what the full amount over a monthly paying a/c is

regularsaver1

ahh I now understand - i thought that the interest was being paid elsewhere for a minute

masonic

Turtle wrote:

yes its still calculated daily, but you'd earn less interest than you would with a monthly paying account with the same rate

If you are comparing the AER's of different accounts, it does not matter whether the interest is paid monthly or annually.

Turtle

Yes, true. A lot of people dont know to do this though. Regularsaver - the Annual Equivalent Rate takes into account the different times that interest is paid, any charges etc so this allows a direct comparison

Turtle

Any way, as I'm a bit sad Im working out the figs for annual v monthly intersest payments as I'm interested in the answer my self now!

regularsaver1

But like you said the AER will be the best rate for comparison - so don't need to work out the nitty gritty's lol

mine is paid annually, don't know whether to change

Turtle

which have you got currently and do you know what rate you're getting?

masonic

Turtle wrote:

Any way, as I'm a bit sad Im working out the figs for annual v monthly intersest payments as I'm interested in the answer my self now!

Look at ICICI - they pay interest monthly. Their AER is 5.15% and their gross rate is 5.03%. Essentially, the difference between those rates amounts to the difference between compounding interest monthly vs. annually...

Edit: ...specifically, you would need an account paying 5.15% gross annually to match an account paying 5.03% gross monthly.