Halifax ISA 3.00% AER now available.

Stompa

shepstone wrote: »

Secondly interest is paid at the end of the 12 months and not monthly.(This information isn't highlighted like the other features but is somewhat hard to find in a paragraph near the bottom of the second page-the summary box page). Therefore if I am correct there is no monthly compounding of interest earned-another sly way of sqeezing more out of you.

Usually when both monthly and annual interest options are available the AER's are the same for each, so it makes no difference (for an ISA) anyway.

rb10

shepstone wrote: »

The most important feature to me of this ISA offer are the words variable interest. I expect them to suck people in with the headline 3.0% and unlimited withdrawals. They may get a lot of ISA transfers in 'cos they have the top offer at the moment. I can't see any other banks improving on this even though there's still about 5 weeks to go till ISA deadline.
But beware they can then drop the interest rate by 0.2% or 0.3% after 2 or 3 months grace. Granted that's not a massive amount but it is infuriating. I don't trust them an inch and will not put any money into a 'variable' account.

They have not done this in the past on either this account or similar accounts, so why do you think they are going to start now?

jennifernil

rb10 wrote: »

From the Special Conditions:



It goes on to say that the ISA Direct Reward became an eligible savings account on 22 September 2010.

The accompanying letter also states that:



So ... I registered my account for the bonus interest on 22/09/2010. This lasts until 22/09/2011.
If I close the account before 22/09/2011, then I forfeit all my bonus interest.
If I close it between 22/09/2011 and 05/04/2012 then it'll be paid on account closure.
If it's still open on 05/04/2012 then it'll be paid that night.



I believe that the AER is correct, because it's such a small amount.

If you take a gross rate of 0.2%, and say (for argument's sake) that you wait 6 months between the end of your 12 month period and the date that the interest is paid.

If £100 was in the account for the whole 12 month period, then you would have earned £0.20 interest. The compound interest that this could then have earned during the next six months is £0.0004, or 0.0004%. So 0.2% + 0.0004% rounds back to 0. 2% /QUOTE]



There is a fair difference in monetary terms between 0.2% interest on £100 and on £53000 !!

And assuming you continue your ISA with whatever issue is available for the next 12 months, you earn say 3.2% interest on your interest.

Every little helps when rates are so low!

edit: odd that my "quote" function has gone weird.

jennifernil

shepstone wrote: »

The most important feature to me of this ISA offer are the words variable interest. I expect them to suck people in with the headline 3.0% and unlimited withdrawals. They may get a lot of ISA transfers in 'cos they have the top offer at the moment. I can't see any other banks improving on this even though there's still about 5 weeks to go till ISA deadline.
But beware they can then drop the interest rate by 0.2% or 0.3% after 2 or 3 months grace. Granted that's not a massive amount but it is infuriating. I don't trust them an inch and will not put any money into a 'variable' account. Even if base rates do rise during the year they have not mentionned that they will increase the interest rate in line with the base rate.
Secondly interest is paid at the end of the 12 months and not monthly.(This information isn't highlighted like the other features but is somewhat hard to find in a paragraph near the bottom of the second page-the summary box page). Therefore if I am correct there is no monthly compounding of interest earned-another sly way of sqeezing more out of you.
If I signed up with these people-yes the ones with those corny tv adverts-I'd feel like vomiting.
Not for me thankyou

Interest is stated annually as standard. If you want it paid monthly then you need to find an account that does so.

As Stompa said, some give that option but the AER remains the same, so overall there is no gain.

It just depends whether you want/need the monthly income from your account.

rb10

jennifernil wrote: »

There is a fair difference in monetary terms between 0.2% interest on £100 and on £53000 !!

But not in percentage terms.

£100 is just an example; you can scale it up or down as you like. In fact, you could use 'x' and still get the same answer. It's just easier for most people to see what's going on if there is a concrete figure there.

If you want to calculate it on £53000 then just multiply the £ amount by 530. The final division, to make it into a percentage, will undo this meaning that it comes to the same result of 0.20004% ~= 0.2%.

talexuser

exactly, the compounded amount on the 0.2% is insignificant.

shepstone

Well I'm no financial expert. I just looked up what AER means and found a post on moneyguide.co.uk.
This says that if you invest 5 grand at 5.0% with interest calculated monthly you receive 3 pounds more than if it's paid annually. If it doesn't make a diifference why don't they just pay it monthly? That way you could also see it on your statement or online for peace of mind.
I'm surprised that Halifax has no history of reducing interest rates on variable accounts? I had money in two variable isas last year one with natwest, the other with santander and they both reduced the interest rate after two or three months. I think Natwest did it twice over the last 12 months.

shepstone

Sorry if you are looking for moneyguide it should have been yourmoneyguide.co.uk

talexuser

Very few if any accounts will compound your monthy interest, they generally give you a slightly lower monthly % that gives the same total interest over a year as the annual AER. It all depends on the individual terms and conditions of accounts and rates offered so you cannot generalise from a simple formula which does not apply to the terms of the account under discussion.

And banks reducing rates to fleece the apathetic who do not keep an eye on their accounts and are not bothered to swap is hardly new

rb10

shepstone wrote: »

Well I'm no financial expert. I just looked up what AER means and found a post on moneyguide.co.uk.
This says that if you invest 5 grand at 5.0% with interest calculated monthly you receive 3 pounds more than if it's paid annually. If it doesn't make a diifference why don't they just pay it monthly? That way you could also see it on your statement or online for peace of mind.

An account that paid 5% AER monthly would give you exactly the same interest as an account that paid 5% AER annually.

Halifax show the interest rate online anyway (on the new online banking).