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interest - monthly or annual?

hey guys

was just wondering whetehr someone cold advise me whether there is any difference between having the interest on your ISA paid monthly or annually...


does one work out more lucrative than the other, or do you get the same amount of interest overall no matter which one you use?


cheers

p_d
know thyself
Nid wy'n gofyn bywyd moethus...

Comments

  • blinko
    blinko Posts: 2,519 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    monthly works out better as it gets compounded, but you dont get the same rates and it usually pays better to get annual interest.
  • Walletwatch
    Walletwatch Posts: 1,055 Forumite
    Should not make a difference technically, as the rates that are offered annually should have the same effect as the rate offered monthly plus the effect of compounding.

    Don't see how the above cannot stand, especially for an ISA. Otherwise one would always go for the option that gave you the higher effective interest rate.
    It's always the grass that suffers, irrespective of whether the elephants are fighting or making love !!!
  • pavlovs_dog
    pavlovs_dog Posts: 10,213 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    i figured that woould be the case ^, otherwise everyone would opt for one type of interest rather than the other. i just wanted to make sure...im still new to all this

    i think monthly is best for me...seeing it build up each month seems to deter me from taking the money out, which is good :)
    know thyself
    Nid wy'n gofyn bywyd moethus...
  • lipidicman
    lipidicman Posts: 2,598 Forumite
    They are usually both calculated daily but sometimes the yearly option is slightly better - just look at the AER rather than the gross rates to determine this (ie the gross rate is dependant on the period of payment) the AER gives you the yearly equivalent

    ie C&G bonus tracker

    annual interest without bonus
    £50,000+ Gross 4.45 AER 4.45

    monthly interest without bonus
    £50,000+ Gross 4.36 AER 4.45

    note that the gross rates are different, but the AER is the same. My point above is that sometimes you get a higher AER if you opt for yearly (e.g. lloyds online saver) as paying you once is cheaper!
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