How does the interest work on a savings acct?

jackhowson

Just applied for Nationwide's e-Savings Plus account.

I'm going on holiday in July 2011, and wanted to deposit £50 each month from my FlexAccount to the e-Savings Plus account. I applied without finding out when the interest is paid, and realised it's paid annually.

I'm a bit confused about how the interest works - is it calculated based upon my final balance on the year's anniversary from my opening the account? Or is it based upon the £50/month I will have added? If I withdraw the total balance of the account in July, but keep the account open, will I receive any interest in October?

I'm under 18, so should receive the full 2%.

Aegis

It's calculated based on the daily balance, so each day you'll get 1/365 of the annual interest added to an accrual account (which you can't see). On the interest payment date the money will be moved from the accrual account and added to your savings balance. From that point you will also earn interest on the interest.

jennifernil

Your interest will be based on your daily balance, but paid at the end of the year. If you withdraw money but keep the account open the interest will be added at the normal time. If you close the account early your interest will be paid when you close the account.

Your age has no bearing on the amount of interest paid. If you do not pay tax you should complete an R85 for the account.

rb10

jennifernil wrote: »

If you close the account early your interest will be paid when you close the account.

That is true in general, but not on this particular account.

From the Nationwide website:

If 4 or more withdrawals are made in a year, or the account is closed, lower rates will apply for the full 12 months following account opening or anniversary of opening.

jackhowson

rb10 wrote: »

That is true in general, but not on this particular account.

From the Nationwide website:

Great, thank you everyone. So, essentially, it's saying that if I close the account before the anniversary, the interest I am paid will reflect the lower rates -- so I'd be better off keeping it open until the anniversary?

jennifernil

Sorry, did not realise it had special conditions.

So you can only close it without penalty on the anniversary of opening?

That must be a pretty unusual condition.

For an account paying only 2% it hardly seems worth it.

rb10

jackhowson wrote: »

Great, thank you everyone. So, essentially, it's saying that if I close the account before the anniversary, the interest I am paid will reflect the lower rates -- so I'd be better off keeping it open until the anniversary?

Yes - on this account, when you want to stop using it, just withdraw all the money apart from £1 (the minimum balance), wait until the interest is paid, and then close it.

On most accounts you can simply close it when you no longer want it, and have full interest paid up to the date of closure, but not on this one.

xrjtg

You can do a bit better than 2% (with fewer restrictions), but on £50 a month until July you may quite reasonably feel that the ease of dealing with a single company outweighs the extra few pounds interest.